Online Selling & eCRM August 2002 · 2003-10-22 · Online Selling & eCRM Methodology Introduction...

Online Selling& eCRMAugust 2002

www.emarketer.com

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Online Selling & eCRM

Table of Contents 3

Methodology 5

The eMarketer Difference 6

The Benefits of eMarketer’s Aggregation Approach 7

“Benchmarking” and Projections 7

I Introduction 9

A. Estimating the Number of Commercial Websites 10

B. Estimating the Number of Website Visitors 15

C. The Growing Importance of the Internet Channel 20

II B2C Websites 23

A. Website Capabilities 24

Website Budgeting and ROI 26

E-Commerce and General Website Capabilities 35

Managing Website Traffic 43

B. Consumer Preferences 51

III B2B Websites 65


B. User Preferences 81

IV Online Customer Service & eCRM 87



Index of Charts 117

August 2002

Welcome to eMarketer

Dear Reader:

Welcome to eMarketer’s Online Selling and eCRM report.TM The information in this report has beencompiled to help readers understand the current trends and issues facing operators of both business-to-consumer and business-to-business commercial websites.

The Online Selling and eCRM reportTM examines the range of website capabilities that businesses havedeployed, as well as those features that website operators expect to implement in the months ahead.

The report also provides aggregated survey data of internet users’ preferences for various websitefeatures, with coverage of the divergent interests of B2C and B2B website visitors.

The final chapter of this report considers internet-based customer service, or eCRM, withinformation about the latest trends among website operators, as well as consumers’ opinions of onlinecustomer service to date.

If you have any questions or comments concerning eMarketer or any of the material in this report,please call, fax or e-mail us.

Steve ButlerSenior Analyst

Reuse of information in this document, without prior authorization,is prohibited. If you would like to license this report for yourorganization, please contact David Iankelevich [email protected], or 212.763.6037.

Written by Steve Butler

Also contributing to this report:Yael Marmon, researcherAndrew Raff, researcherTracy Tang, researcherAllison Smith, senior editorDavid Berkowitz, editorJames Ku, data entry and productionDana Hill, production artist


4


Steve ButlerSenior Analyst, [email protected]

eMarketer, inc.821 BroadwayNew York, NY 10003T: 212.677.6300F: 212.777.1172

Methodology 5




I Introduction 9

II B2C Websites 23

III B2B Websites 65


Index of Charts 117


5


eMarketer’s approach to market research is founded on a philosophy ofaggregating data from as many different sources as possible. Why? Becausethere is no such thing as a perfect research study and no single researchsource can have all the answers. Moreover, a careful evaluation andweighting of multiple sources will inevitably yield a more accurate picturethan any single source could possibly provide.

The eMarketer DifferenceeMarketer does not conduct primary research. Neither a research firm nor aconsultancy, eMarketer has no testing technique to defend, no research biasand no client contracts to protect.

eMarketer prepares each market report using a four-step process ofaggregating, filtering, organizing and analyzing data from leading researchsources worldwide.

Using the internet and accessing a library of electronically-filed researchreports and studies, the eMarketer research team first aggregates publiclyavailable e-business data from hundreds of global research and consultancyfirms. This comparative source information is then filtered and organizedinto tables, charts and graphs. Finally, eMarketer analysts provide conciseand insightful analysis of the facts and figures along with their ownestimates and projections. As a result, each set of findings reflects thecollected wisdom of numerous research firms and industry analysts.

“I think eMarketer reports are extremely useful andset the highest standards for high quality,objective compilation of often wildly disparatesources of data. I rely on eMarketer’s researchreports as a solid and trusted source.”— Professor Donna L. Hoffman, Co-Director, eLab, Vanderbilt University

www.eMarketer.com©2001 eMarketer, Inc.

Analyze

Aggregate

Filter

Organize


6


Methodology

Introduction

B2C Websites

B2B Websites

Online CustomerService & eCRM

Index of Charts

The Benefits of eMarketer’s AggregationApproachObjective: information is more objective than that provided by any singleresearch sourceComprehensive: gathered from the world’s leading research firms,consultancies and news organizationsAuthoritative: quoted in leading news publications, academic studies andgovernment reportsAll in one place: easy to locate, evaluate and compareReadily accessible: so you can make quick, better-informed businessdecisionsAbove the hype: accurate projections that business people can use withconfidenceTime saving: there’s no faster way to find internet and e-business stats,online or offMoney saving: more information, for less, than any other source in theworld

“Benchmarking” and ProjectionsUntil recently, anyone trying to determine which researcher was mostaccurate in predicting the future of any particular aspect of the internet didnot have a definitive source with which to do this. For instance, over 10firms predicted e-commerce revenues for the fourth quarter 1998 onlineholiday shopping season, and yet no single source could be identified afterthe fact as having the “correct” number. In the Spring of 1999, however, theUS Commerce Department finally began measuring e-commerce B2Cactivity so business people and others could have a benchmark with whichthey could compare and evaluate projections.

eMarketer has adapted its methodology to recognize that certaingovernment and other respected, impartial sources are beginning toprovide reliable numbers that can be consistently tracked over time. Mostof these established sources, however, only measure past results; typically,they do not make predictions.


7


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts


8


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Today, eMarketer formulates its Essential E-Business Numbers by firstidentifying the most established, reputable source for a given sector beingmeasured and then adopting that organization’s figures as benchmarks forthe historical/current period. For instance, eMarketer’s US internet userfigures will be based on a combination of the most recent data from the USCensus Bureau and the International Telecommunication Union. Using thisdata as the benchmark for 2000 and 2001, eMarketer will make projectionsfor subsequent years based on the following factors:

■ a comparative analysis of user growth rates compiled from otherresearch firms

■ additional benchmark data from internet rating firms, e.g.,Nielsen//NetRatings and Jupiter Media Metrix, which use panels tomeasure internet user activity on a weekly and monthly basis

■ an analysis of broader economic, cultural and technological trends inthe US

Similarly, US e-commerce revenues are being “benchmarked” usinghistorical data from the US Department of Commerce, and broadbandhousehold and penetration rate forecasts are being built off baseline datafrom the Organization for Economic Cooperation and Development (OECD).

Through this benchmarking process, eMarketer will be holding itself –and our projections – accountable.

“When I need the latest trends and stats on e-business, I turn to eMarketer. eMarketer cutsthrough the hype and turns an overabundance ofdata into concise information that is sound anddependable.”— Mark Selleck, Business Unit Executive, DISU e-business Solutions, IBM

IMethodology 5

I Introduction 9




II B2C Websites 23

III B2B Websites 65


Index of Charts 117


9



10


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

A. Estimating the Number of CommercialWebsitesAs most people who are familiar with the phenomenal growth of theinternet are well aware, there has been a dramatic increase in the numberof websites during the past 10 years. And although they make up asignificant portion of the broader universe of registered internet domains,determining the exact number of active commercial websites has beendifficult to do.

As a starting point, in July 2002, Telcordia Technologies counted 194million internet hosts – individual computer devices that have an internetprotocol (IP) address, and are therefore accessible via the internet.

The vast majority of those addresses fall under the .net domain, with 65.3million hosts registered under this top-level domain. A further 42.1 millionIP addresses fall under the .com domain, followed by 8.6 million that areregistered under the .edu domain.

It should be noted, however, that a single internet service provider (ISP)can typically operate several thousands of internet hosts. AOL.com, forexample, operates nearly 4.9 million hosts of its own, such as those atshop.aol.com or hometown.aol.com.

Thanks to the growing popularity of the internet among average citizens,the registration of commercial and non-profit organizations’ websitesunder the .com, .net and .org domains soared during the 1990’s, increasingfrom less than 10,000 such websites in 1993 to more than 8 million by1999, according to data from Network Solutions.

Number of Internet Hosts, by Top Level Domain, July2002 (in millions)

.net 65.33

.com 42.17

.edu 8.62

.jp 8.36

.ca 3.22

.de 2.92

.it 2.91

.uk 2.90

Source: Telcordia Technologies, July 2002

041906 ©2002 eMarketer, Inc. www.eMarketer.com


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Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

It is important to note, however, that the number of registered domainnames does not accurately reflect the actual number of websites that are upand running, as many have closed, while several other registered domainsremain dormant.

Among the best efforts to gauge the precise number of websites that areaccessible via the internet, comparative estimates by the Online ComputerLibrary Center (OCLC) and Alexa International place the number ofwebsites at between 8.4 million and 10.0 million worldwide in 2001.

Cumulative Domain Name Registrations in the .Com,.Net and .Org Domains, 1993–1999 (in millions)

199519941993 1996 1997 1998 1999

0.01 0.04 0.20.6

1.5

3.4

8.1

Source: Network Solutions, 2000

2

6

10

www.eMarketer.com001801 ©2000 eMarketer, Inc.


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Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

In the case of Alexa International, this represents a four-fold increase in thenumber of websites during the past four years over Alexa’s initial estimateof 2.5 million websites in 1998.

The OCLC estimates that 3.1 million, or 37%, of the 8.4 million websitesthat it has counted are accessible to the public, while 2.1 million websiteshave restricted access. A further 3.2 million websites, according to theOCLC, are in a transitional or unfinished state.

Broken down by each website providers’ primary economic activity, theOCLC estimates that the largest percentage of public websites is operated byinformation providers. As for other commercial websites, approximately990,000, or 11.8%, of public websites are classified as being operated byfirms in the retail industry, while about 714,000 public websites come frombusinesses in the manufacturing industry.

Number of Websites Worldwide, 1998-2001 (in millons)

1998

2.6 2.5

1999

4.7

3.4

2000

7.16.0

2001

8.4

10.0

3

9

15

Online ComputerLibrary Center, Inc.

Alexa International

Source: eMarketer, 2002; Alexa International, 2000; Online ComputerLibrary Center (OCLC), October 2001



13


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

The OCLC’s annual study examined a random sample of just over 4.29million IP addresses to arrive at its estimates. The estimates of each websiteoperator’s role in the economy are in turn classified according to the NorthAmerican Industrial Classification System (NAICS).

Of course, not all commercial websites have the ability to conducttransactions, as many businesses operate “brochure-ware” websites thatprovide information about their company’s products or services but do notactually sell goods or services online.

As a means of approximating the number of websites with e-commercecapabilities, the OECD looks at the number of secure web servers that are inoperation within each of its member countries. Secure web servers arenecessary for the exchange of encrypted data, such as credit cardinformation, and thereby provide a rough indication of the number ofcommercial websites that are able to conduct internet-based transactions.

As of late-2001, the OECD estimates that the number of secure servers inthe United States reached 315.3 servers per million inhabitants, up from27.6 servers per million inhabitants in 1997. Based upon the US CensusBureau’s estimate of 287 million US citizens in 2002, there wereapproximately 90,554 secure servers being operated in the United States asof last year.

Classification of Public Website Providers' PrimaryEconomic Activity, October 2001 (as a % of public siteproviders)

Information 15.5%

Professional, scientific and technical services 14.2%

Other services (except public administration) 12.8%

Retail trade 11.8%

Manufacturing 8.5%

Educational services 6.6%

Arts, entertainment and recreation 4.7%

Accommodation and food services 2.8%

Real estate, rental and leasing 2.3%

Finance and insurance 2.1%

Others 9.6%

Unknown 9.1%

Source: OCLC Online Computer Library Center, Inc., October 2001



14


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Similarly, using OECD population data from 2000, eMarketer has calculatedthat there were roughly 7,940 secure servers being operated in the UK in2001, compared with 1,960 in France and 6,450 in Germany.

And finally, it is worthwhile to note that despite its strong commercialroots in the United States, the internet has become increasingly relevant toa wider international audience over the past several years.

According to IDC, nearly half of all websites are directed at non-Englishspeakers, while 42.8% of websites provide multilingual content.

Secure Servers per Million Inhabitants in the EU andUS, 2000 & 2001

2000 2001

US 240.3 315.3

Luxembourg 101.7 157.2

Sweden 91.6 142.4

UK 74.0 133.0

Finland 66.3 127.6

Ireland 65.4 124.7

Austria 55.2 108.9

Denmark 54.3 98.3

Germany 45.8 78.5

Belgium 26.2 42.1

France 21.9 33.3

Spain 19.3 30.3

Italy 13.9 22.1

Portugal 11.6 19.2

Greece 8.3 16.7

Source: OECD, July 2001


Multilingual- excluding English4.0%

Monolingual-English

17.0%

Multilingual- including English

38.8%

Monolingual- non-English40.2%

Website Language Availability Worldwide, 2001

Note: Base: business establishments with web access whose organizationscurrently have a websiteSource: International Data Corporation (IDC) eWorld 2001 Survey, 2001



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Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

B. Estimating the Number of WebsiteVisitorsAccording to eMarketer’s most recent estimates, the number of internetusers is expected to reach 565 million people worldwide by the end of2002, increasing by 13.6% over the 498 million people who regularly usedthe internet in 2001.

Internet Users Worldwide, by Region, 2000-2004 (inmillions)

North America**

Europe

Asia-Pacific

Latin America

Africa

Total Worldwide

2000*

136.7

108.3

115.9

19.3

4.6

384.8

2001*

156.3

144.4

165.0

26.2

6.7

498.7

2002

167.7

175.7

181.5

33.1

7.7

565.7

2003

179.8

196.2

205.0

43.4

9.2

633.6

2004

196.3

221.1

235.8

60.6

11.1

724.9

CAGR2000-2004

9.5%

19.5%

19.4%

33.1%

24.6%

17.2%

Note: *eMarketer's year 2000 and 2001 baselines are from theInternational Telecommunication Union's estimate of internet users aged 2years and older, who have accessed the internet within the previous 30days; **North America includes the US and Canada. Mexico is included inLatin AmericaSource: eMarketer, May 2002



16


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

It is estimated that the number of internet users in the United States willaccount for 27.0% of the worldwide total by the end of this year, reaching152.8 million people, or 53.2% of all Americans.

Of course, not everyone who goes online is necessarily an online shopper,with many internet users preferring to use the internet primarily forcommunication or information purposes.

Total US Internet Users and Internet Users Ages 14+,2000-2004 (in millions)

2000*

124.0

112.6

2001*

142.8

129.6

2002

152.8

138.6

2003

162.0

147.0

2004

174.9

158.8

Total internet users Internet users ages 14+

Note: *eMarketer's year 2000 and 2001 baselines are from theInternational Telecommunication Union's estimate of internet users aged 2years and older, who have accessed the internet within the previous 30days; the age 14+ group represents roughly 90.75% of all US usersaccording to the August 2000 US Department of Commerce surveySource: eMarketer, May 2002



17


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Nonetheless, eMarketer estimates that approximately 52.4% of internetusers in the United States will make an online purchase in 2002, comparedwith 79.0% of Americans who may be referred to as online shoppers –people who visit commercial websites, but do not necessarily conclude anonline transaction.

For more information about internet users in other countries, pleasesee eMarketer’s eGlobal Report

US Consumer Online Buying and Shopping Grid,2000-2004 (in millions and % penetration)

INTERNET USERS*

US population aged14+ (US Census )

Total US internet users

Internet users aged14+

Online penetrationamong populationaged 14+

SHOPPERS

% Internet users aged14+

Shoppers aged 14+

BUYERS

% Internet users aged14+

Buyers aged 14+

Average annualpurchase per onlinebuyer

Total US B2Ce-commercerevenues (incl.online travel)**

2000

221.3

124.0

112.6

50.9%

73.0%

82.2

47.0%

52.9

$769.06

$40,700

2001

223.2

142.8

129.6

58.1%

77.0%

99.8

49.2%

63.8

$797.81

$50,900

2002

225.6

152.8

138.6

61.4%

79.0%

109.5

52.4%

72.6

$1,032.68

$75,000

2003

228.0

162.0

147.0

64.5%

81.0%

119.1

54.6%

80.3

$1,249.66

$100,300

2004

230.5

174.9

158.8

68.9%

82.0%

130.2

60.7%

96.4

$1,307.17

$126,000

Note: *eMarketer’s internet user figures are based on the ITU baselinedata from 2000 and 2001; the age 14+ group represents roughly 90% of allusers according to the August 2000 Department of Commerce Survey;**eMarketer benchmarks it’s B2C retail revenue figures against USDepartment of Commerce data, for which the last period measured wasQ1 2002; the travel component was formulated based on aggregated dataSource: eMarketer, May 2002; various, as noted, 2000 & 2001



18


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

As for the volume of traffic supported by some of the internet’s busiestwebsites, mid-2002 data from comScore Media Metrix shows thatcommercial websites are among the top 10 categories of website visited byinternet users in the United States.

As an entire category, websites representing a corporate presence on theinternet saw visits from 54.4 million unique visitors during the last week ofJune 2002 alone. Online retailers in the United States had visits from 21.5million people during that same week, compared with 18.9 million visitorsto news and information websites, and 18.3 million visitors toentertainment websites.

Top 10 US Internet Categories, Week Ending 30 June2002 (in thousands of average daily unique visitors)Corporate presence 54,412

Services 47,249

Portals 43,350

ISPs 26,915

Retail 21,514

Promotional servers 19,457

News/Information 18,952

Search/Navigation 18,872

Entertainment 18,312

Directories/resources 17,030

Source: comScore Media Metrix, 2002



19


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Among the top 10 website properties online, the largest in the United Statesis AOL Time Warner, which saw 31.3 million daily unique visitors duringthe week ending June 30th. Most of the other leading online propertiesvisited by American internet users were also operated by companies thatprovide internet portal services, which typically have extensive news,information, and entertainment offerings as well.

Compared to these leaders, the busiest retail website, Amazon.com, saw 30.1 million unique visitors during the entire month of December 2001 – the peak month for online shopping throughout the year.

Top 10 US Internet Properties, Week Ending 30 June2002 (in thousands of average daily unique visitors)AOL Time Warner 31,311

MSN - Microsoft sites 25,449

Yahoo! sites 21,631

Gator Network 6,150

Google sites 5,780

eBay 5,866

AWS Technology 5,394

Excite Network 4,803

Terra Lycos 4,125

United Online, Inc. 3,248

Source: comScore Media Metrix, 2002



20


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

C.The Growing Importance of the InternetChannelIn its comprehensive look at the state of commercial websites in the UnitedStates, the Direct Marketing Association (DMA) has found that the majorityof businesses still believe that their website’s main purpose is to serve as asales and marketing tool.

As of late 2001, a substantial 85% of respondents to the DMA’s surveysaid that their website’s primary purpose is to provide information aboutthe products or services that their company sells, while 44% of respondentsalso agreed that their website’s primary purpose is to make sales.

It is worthwhile to note, however, that the proportion of websites with e-commerce capabilities increases considerably among consumer-facingwebsites, for which 64% of 149 respondents indicated that their company’swebsite was primarily sales-focused.

By contrast, just 25% of the 298 business-to-business websites surveyedby the DMA said that they sold goods or services online.

Interestingly, a significant number of businesses now have as many as five years’ worth of internet experience in 2002. The percent of companiesthat said they had had a website for five or more years doubled last year,increasing to 34% of respondents in 2001, up from 16% of respondents in 2000.

Primary Purpose of US Companies’ Websites, 2001 (asa % of respondents)

Product/service information 85%

Lead generation 57%

Public relations/image 51%

Sales/e-commerce 44%

Advertising 38%

Customer service 33%

Source: Direct Marketing Association, April 2002


Length of Time that US Companies Have Had aWebsite, 2001 (as a % of respondents)

2+ 81%

5+ 34%

Source: Direct Marketing Association, April 2002



21


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

And with a few years’ worth of online experience behind them, there is agreater confidence among commercial website operators that their websiteswill soon be profitable. Nearly 70% of the companies surveyed by the DMAexpect to have profitable online operations by the end of 2002, up fromjust 14% of respondents in 2001.

Taken together, these survey results show that after as many as five years of online experimentation and website development, the internet is well on its way to becoming an important sales and marketing channel formany businesses.

Businesses have furthermore gained a much better understanding of therole that their web presence shall play, not only as a new sales channel thatcompliments traditional, offline sales channels, but as an importantcommunications channel through which they may better serve theircustomers as well.

More thanfour years

14%200317%

200255%

200114%

US Companies' Expected Timing of Profitability fortheir Website Operations, 2001 (as a % ofrespondents)

Note: n=404Source: Direct Marketing Association, April 2002



22


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Indeed, as eMarketer has found through its analysis of the aggregatedsurvey data in this report, the greatest value of many companies’ onlinepresence lies not in their ability to conduct online transactions, but rather,in their ability to provide timely and convenient customer service, bothbefore and after a transaction is completed.

Building upon their early achievements, the road ahead for many websiteoperators will therefore see them add depth to those customer servicecapabilities that they now offer on their websites. Several companies are alsosetting out to raise the standards with which they serve their customers online.

And finally, website operators are continuing the integration work thatwill link their online sales and customer service channels with traditionaloffline channels, with the oft-stated goal of obtaining a 360-degree view oftheir customers, while at the same time providing their clients with aseamless, multi-channel relationship with their company.

CRM

Awareness/Branding

Pre-purchaseInformationGathering

Marketingand lead

generation

Sales/Purchase

Fulfillment

Post-SalesSupport

The Internet's Impact on the Sales Cycle

Source: eMarketer, 2002


IIMethodology 5

I Introduction 9

II B2C Websites 23



III B2B Websites 65


Index of Charts 117


23



24


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

A.Website CapabilitiesBy the time business-to-business e-commerce began to gather its initialmomentum in the latter half of 1999, business-to-consumer e-commercehad already had a four- to five-year head start.

As a result, business-to-consumer (B2C) websites typically have a fewmore years’ of e-commerce experience than most of their business-to-business (B2B) counterparts.

According to a late-2001 study conducted by the e-tailing group and theDirect Marketing Association (DMA), it was found that 39% of the 214consumer catalog companies that were surveyed had had an online catalogfor five or more years.

In a separate survey of B2C and B2B companies, the Direct MarketingAssociation found that 75% of B2C companies had operated a website forthree or more years by late 2001, compared with 62% of B2B companies.


25


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

As for the primary purpose of most B2C companies’ websites, the majorityof businesses said that they were run as a means of providing informationabout their companies’ products and services. A significant 64% ofrespondents said that these websites were also being run as a means ofgenerating sales, while a narrower 44% said that their B2C websites werefor customer service.

The majority of B2C websites in the DMA study expected to have profitableonline operations in 2002, with 71% of respondents forecastingprofitability by the end of this year.

Primary Purpose of US Companies' B2C Websites,2001 (as a % of respondents)

Provide information about products and services

71%

Sales/e-commerce

64%

Customer service

44%

Lead generation

41%

Public relations/image enhancement

38%

Gather e-mail addresses (not for lead generation)

34%

Advertising

29%

Build online community

27%

Fund raising

14%

Conduct survey/market research

12%

Order fulfillment

11%




26


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Website Budgeting and ROIIn early 2002, Catalog Age magazine surveyed 357 of its subscribers,finding that nearly 90% of all catalog companies operated an onlineversion of their print catalog, up from 60% of respondents in 1997. Brokendown by their catalogs’ main clients, 80.6% of those companies that servedbusiness customers operated a website in 2001, compared with 92.6% ofB2C companies.

On average, catalog companies with annual sales of more than $50million spent almost $200,000 per year on their website operations.Expenses include ongoing maintenance of website operations, staffing, andonline promotional activities.

As a percent of their overall company spending, website budgetsconsumed approximately 6.6% of the largest catalogers’ entire budgets, buta much more burdensome 12.0% of smaller companies’ budgets.

When it comes to website staffing needs, Catalog Age found that companies with sales of between $1 million and $10 million had anaverage of 1.2 employees running their website operations, whilecompanies with sales of between $10 million and $50 million had anaverage of 1.6 full time employees.

By comparison, more than half of the survey’s largest respondents hadan average of five employees maintaining their companies’ websites.

Catalog Companies' Average Annual Spending* onWebsite Operations, by Company Size, 2002

Sales of $50 million+

Sales of $10 million - $49.9 million


Sales of less than $1 million

Average annualspending

$198,924

$125,103

$44,215

$14,944

% of companybudget

6.6%

6.6%

8.5%

12.0%

Note: *includes staffing, website maintenance and online promotionsSource: Catalog Age, June 2002


Average Number of Employees Working Fulltime onCatalog Companies' Websites, 2001 & 2002

2001 3.6

2002 2.0

Source: Catalog Age, June 2002



27


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Most online catalogers were found to rely upon in-house website design,with a growing number of survey respondents bringing their websitedesign activity in-house in 2002.

Large companies were more likely to have designed their websitesthemselves, with 76% of large catalogers saying that they had kept theirwebsite design in-house, compared with just 59% of small catalog companies.

Very few companies expected to reduce their website spending in 2002, asno more than 14.2% of large catalog companies had plans to cut theirwebsite budgets according to the Catalog Age survey.

Indeed, eMarketer has found in survey after survey that website and e-commerce initiatives have remained at the top of most companies’ e-business spending priorities, despite the overall downturn in IT spendingduring the past two years.

In its late-2001 survey, the Direct Marketing Association (DMA) took aneven closer look at how online retailers broke down their website spending,finding that marketing and related promotional costs accounted for nearlyhalf of most B2C companies’ budgets.

Other areas that consume significant resources include operations andstaffing, which on average accounted for 28.9% and 21.1% of most B2Ccompanies’ website spending in 2001.

Percent of Online Catalog Operators that UseIn-House Website Design, 2001 & 2002

2001 58.0%

2002 61.6%



Percent of Catalog Companies that Have ReducedTheir Website Budgets, by Company Size, 2002 (as a %of respondents)

Sales of $50 million+

14.2%


8.0%


6.6%

Sales of less than $1 million

8.7%




28


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

It should be noted that the spending levels indicated below are averagespending levels for each separate category, and therefore do not add to 100.

Breaking out B2C companies’ website development budgets, respondents tothe DMA study varied considerably in how much they expect to spendduring 2002. Such differences may be accounted for by the dissimilar sizeof respondents’ online operations, as well as the varying complexity ofeach company’s planned development initiatives.

Just over one-third of B2C companies expected to spend more than$500,000 on website development projects in 2002, while an additional30% of respondents expected to spend between $100,000 and $500,000. On average, respondents to the DMA study planned to spend $231,842developing their consumer-focused websites this year.

Breakdown of US Companies' Spending on their B2CWebsites, 2001

Marketing 37.0%

Operations 28.9%

Staffing 21.1%

Advertising 14.4%

New business development 11.9%

Merchandising 4.0%

Note: n=40; average spending per category, multiple responses allowedSource: Direct Marketing Association, April 2002


US B2C Companies' Forecast Website DevelopmentBudgets, 2002 (as a % of respondents)

Nothing 2%

$1 to $5,000 13%

$5,001 to $10,000 2%

$10,001 to $50,000 13%

$50,001 to $100,000 15%

$100,001 to $250,000 13%

$250,001 to $500,000 17%

$500,001 to $1,000,000 17%

$1,000,001 to $7,500,000 17%




29


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

B2C website owners have further planned to spend a considerable amountof money promoting their websites in 2002, with 32% of respondentsprojecting promotional budgets of more than $500,000.

On average, companies with B2C websites expect to spend $821,605 to promote their websites in 2002, compared with an average of just$58,056 among their B2B counterparts. This is largely due to the fact thatonline retailers tend to sell more products online than companies that sellto other businesses.

In two mid-2001 studies that examine the cost and return on investment(ROI) of selling online, Forrester Research has broken down consumerproducts into three separate categories: convenience goods, researchedgoods and replenishment goods.

Due to their relatively low cost and low complexity, Forrester definesconvenience goods as items such as clothing and toys that are sold bycompanies like J. Crew and KBToys. Researched goods are more complexitems, such as automobiles or consumer electronics, while replenishmentgoods are defined as items that consumers regularly purchase, such asbeauty or personal care products.

According to Forrester Research, products that fall into each of these threecategories should be viewed as distinct from one another when they are soldonline. Because of these distinctions, online retailers need to consider howthey build their websites to account for the different needs that internetshoppers have when they go to purchase each category of product.

US Companies' Anticipated 2002 Budgets for theMarketing and Promotion of their B2C Websites, 2001(as a % of respondents)

Nothing 8%

$1 to $5,000 15%

$5,001 to $10,000 2%

$10,001 to $50,000 19%

$50,001 to $100,000 2%

$100,001 to $250,000 13%

$250,001 to $500,000 10%

$500,000 to $1,000,000 13%

$1,000,001 to $7,500,000 19%




30


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

For example, convenience goods websites typically need to spend more onhigh-quality product displays, which in turn are more likely to drive onlinesales of clothing or gift purchases.

More sophisticated convenience goods websites can expect to spend asmuch as $40.9 million developing their online store, according to Forrester,as these websites will need to employ advanced customer analyticssoftware, along with highly-tuned search capabilities. Landsend.com andSmarterKids.com are provided as examples of sophisticated websites withinthis category.

Due in part to the complex nature of researched goods such as homefurnishings or automobiles, Forrester Research believes that companiesselling these products will have to spend the most to develop their websites.

Despite the fact that many researched goods are eventually purchasedoffline, consumers typically rely upon these products’ websites to learnabout the products that they might want to buy. As a result, the need tomaintain extensive website content, along with the use of configurationtechnology for some products (consumer electronic goods in particular), isexpected to run up the cost of building and operating such websites.

Forrester estimates that researched products’ websites can cost between$3.5 million and $52.2 million to develop. Examples of sophisticatedwebsites within this category include Outpost.com and Potterybarn.com.

Monthly Traffic and Sales Capabilities for a WebsiteSelling Convenience Products, by Type of Website,2001

Basicwebsite

Mainstreamwebsite

Sophisticatedwebsite

Page views per month 5,000,000 10,000,000 50,000,000

Number of SKUs 1,000 10,000 50,000

Transactions per month 15,000 60,000 150,000

Peak sessions 100 500 2,500

Total upfront costs $3,100,000 $13,300,000 $40,900,000

Source: Forrester Research, comScore, July 2001


Monthly Traffic and Sales Capabilities for a WebsiteSelling Researched Products, by Type of Website, 2001

Basicwebsite

Mainstreamwebsite



Number of SKUs 500 5,000 25,000







31


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Websites that sell replenishment goods are the least expensive to buildaccording to Forrester Research, in part because they do not require richproduct displays or extensive background information about the productsthey sell. These websites do, however, require fast and convenientnavigation capabilities, as consumers are expecting convenience whengoing online to purchase replenishment items.

Forrester recommends that websites such as CVS.com should havepersonalized content as a means of making online shopping even moreconvenient for their customers, while at the same time providing internetretailers with the opportunity to cross- or up-sell other products to theirregular visitors.

Forrester lists lancome.com and drugstore.com as examples of sophisticatedwebsites within this category. Companies can expect to spend between $3.2million and $28.8 million to develop replenishment goods websites.

For three more charts providing a further breakdown of the costs ofbuilding these websites, please see the eStatDatabase

Monthly Traffic and Sales Capabilities for a WebsiteSelling Replenishment Products, by Type of Website,2001

Basicwebsite

Mainstreamwebsite



Number of SKUs 1,000 10,000 50,000







32


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

When it comes to measuring the success of their B2C websites, most onlineretailers clearly emphasize sales. According to the DMA’s survey,consumer-facing websites are also concerned with the number of leadsgenerated by their websites, and the number of visits or hits they receive ontheir websites as well.

Confirming the DMA’s findings, Forrester Research estimates that onlinesales make up the greatest portion of a website’s ROI, with those websites thatsell convenience and replenishment goods, for example, likely to see as muchas 65% to 75% of their development costs returned through online sales.

Savings from the use of e-mail marketing as a means of driving onlinesales are also expected to be substantial, lowering traditional marketingcosts from as much $18 to an estimated $2 per sale, according to Forrester’s calculations.

Forrester has gone on to emphasize two other important benefits of e-commerce operations as well. These include the impact of a company’swebsite upon offline sales, and the gains in operational efficiencies thatcome thanks to the automation of customer interactions.

Re-directed offline sales are typically a small part of a website’s ROIaccording to Forrester, mostly because brick-and-mortar stores or catalogoperations already have a strong influence on offline sales. As a result,Forrester estimates that about 5% of a website’s ROI may be attributed tooffline sales, although researched goods’ websites may expect to obtain ahigher ROI from re-directed offline sales of as much as 15%.

Second on Forrester’s list are the savings achieved through operationalefficiencies. The use of customer self-service features, coupled with higherprofit margins from online sales of liquidated inventory, are estimated byForrester to generate as much as 24% of a company’s entire ROI from itswebsite operations.

How US B2C Website Operators Measure the Successof their Online Media Initiatives, 2001 (on a scale of1-9*)Sales generated 1.6

Leads generated 3.2

Hits on designated/unique urls 3.7

E-Mail addresses collected 4.4

"Hits" on home page 4.4

Cost per website customer 4.9

Cost per website visitor 5.8

Learning/education 6.3

Other measures 9.0

Note: n=67; *1=most effective, 9=least effectiveSource: Direct Marketing Association, April 2002



33


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Basing its estimates upon a fictional multi-channel retailer with sales ofbetween $750 million and $1.5 billion across all channels, ForresterResearch has broken down its estimates of the ROI that retailers mightexpect to see from their online operations.

For example, Forrester predicts that the greatest ROI for an online vendor of convenience goods will come from new sales generated by itswebsite operations.

In addition to the 18% return that would be generated from sales intonew domestic or foreign markets, Forrester predicts that such websitescould also benefit from cross- and up-sell features that would generatemore sales per online customer.

In total, 66% of the ROI for a “sophisticated” convenience goods websiteis estimated to come from online sales, with a further 24% expected to comefrom operational efficiencies that would be achieved through online sales.

By comparison, Forrester predicts that 49% of the ROI from a“sophisticated” researched goods website would come from increasedoperational efficiencies, while 35% of the website’s ROI would beattributable to redirected offline sales. Just 16% of the ROI for a researchedgoods website would be generated by online sales.

“Shoppers are going into stores with printouts inhand. They’ve done their homework, educatingthemselves on-line and now they’re ready to makea purchase.”– Simon King, Vice-President, Broadvision

Breakdown of Third-Year ROI for a "Sophisticated"Website Designed to Sell Convenience Goods, 2001(as a % of total ROI)Online sales

Sales into new markets 18%

Merchandising tools that drive sales of additional items 16%

Increased sales through a user friendly user interface 13%

Growth in cross-channel customer base 10%

Sales via affiliate programs 9%

Operational Efficiencies

Improved liquidation margins 10%

Savings through use of e-mail marketing retention 10%

Savings through customer self-service 4%

Offline Sales

Increased in-store sales 4%

Other 6%

Source: Forrester Research, August 2001



34


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

First and foremost, Forrester sees websites for researched goods as amarketing tool, helping to drive offline sales by providing timely andconvenient information to potential customers. Significant operationalsavings, accounting for as much as 12% of a website’s ROI, may also beachieved through customer-self service, which reduces the need forcompanies to rely upon customer service representatives or sales personnelto answer common customer questions.

Forrester also notes that researched goods vendors can see significantbenefits by driving more sales of liquidated inventory online, as consumersare less likely to be concerned with the shipping costs of goods that havebeen discounted.

For online vendors of replenishment goods, Forrester Research suggeststhat most retailers will only require a “basic” website, since customers needlittle additional information about the products they are buying.

The greatest ROI for such websites is estimated to come from cross-channel customers - those customers who buy both online and at theretailer’s brick and mortar stores. These websites are also able to generatesubstantial ROI through their ability to cross- or up-sell goods to onlinecustomers through the use of effective merchandising tools.

Breakdown of Third-Year ROI for a "Sophisticated"Website Designed to Sell Researched Goods, 2001 (asa % of total ROI)Offline sales

Increased in-store sales 35%


Improved liquidation margins 25%

Savings through customer self-service 12%

Savings through hands-free order taking 7%


Online Sales

Increased sales through a user-friendly user interface 3%


Sales via manufacturer referrals 3%

Other 7%




35


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Overall, 74% of these websites’ ROI is projected to come from increased online sales, while 22% of their ROI is expected to come fromoperational efficiencies.

E-Commerce and General Website CapabilitiesTurning to online retailers’ e-commerce capabilities, the DMA found that71% of B2C websites were able to conclude financial transactions online in2001, compared to just 20% of their business-to-business counterparts.

Breakdown of Third-Year ROI for a "Basic" WebsiteDesigned to Sell Replenishment Goods, 2001 (as a %of total ROI)Online sales

Growth in cross-channel customer base 32%


New domestic sales 11%

Sales via affiliate programs 9%

Sales via manufacturer referrals 4%



Savings through hands-free order taking 10%

Other 4%



Do notconduct financial

transactions29%

Able to conductfinancialtransactions71%

Percent of US Companies' B2C Websites Able toConduct Financial Transactions, 2001




36


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Online retailers offered an average of 50 items via their websites last year,while those companies that operated online retail catalogs sold an averageof 125 items, according to the DMA study.

By comparison, B2B website operators sold an average 10 items throughtheir websites and 275 items through their online catalogs. Companies withonline catalogs often sold their goods through resellers’ websites, inaddition to their own direct online channel.

On the other hand, according to Shop.org, several of the largest internetretailers are now scaling back their online operations in a bid to becomebetter focused and more profitable. Wal-Mart, for example, is in the processof shifting its online sales toward high-end goods such as consumerelectronics.

Similarly, Federated Department Stores has taken steps to focus itswebsite by reducing the volume of inventory that it sells via Macys.com.Shop.org reports that the Macys.com website will scale back its onlineinventory by one-third, to approximately 50,000 SKUs by the end of 2002.

The DMA found that the average dollar value of B2C companies’ websitetransactions was $68 in 2001, while items sold through online catalogswere an average $60 per transaction.

As for those website features that are available to visitors of B2C websites,the DMA found that it was most common for regular users to have to loginto retailers’ websites, either to access information or conclude atransaction. E-newsletters were also likely to be found on most internetretailers’ websites.

E-Business Profile: Approximate Number of ProductSKU's Available via Macys.com, 2001 & 2002

2001 75,000

2002 50,000

Source: STORES Magazine; National Retail Federation, 2002


Average Dollar Value* of US B2C Companies' OnlineTransactions, 2001

Via company website $68

Via online catalog $60

Note: n=110; *excludes S&H, taxes and other add-onsSource: Direct Marketing Association, April 2002



37


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

On the other hand, personalization features, online chat with customerservice, and wireless-enabled versions of B2C websites were not used onmore than 25% of retailers’ websites.

Similarly, in another survey conducted by ActivMedia, it was found thatvery few internet retailers provided content for visitors who might accesstheir websites via a personal digital assistant (PDA). Just 14% of onlineretailers provided streaming media content on their websites, and the samenarrow percentage of B2C websites were XML-enabled.

Website Features and Functions Offered on US B2CWebsites, 2001 (as a % of respondents)

Subscriber/user login 81%

E-Newsletters 77%

Dynamic page creator 47%

Targeted ads 47%

Pop-up offers 38%

Recommendation engine 30%

Personalization platform 25%

Online chat with customer service 25%

Wireless PDA/PDA version 12%

WAP enabled (Wireless Application Protocol) 11%




38


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

It is worthwhile to note, however, that although these capabilities aretypical of what one might expect to find on retailers’ websites in the nearfuture, the majority of B2C websites are clearly focusing upon thedevelopment of more basic website features in 2002.

Indeed, the Answerthink Group found in its late-2001 survey of 200 internetretailers that most respondents had spent the year increasing their ability todeliver detailed product information to their website visitors, while severalhad already deployed automated e-mail service by the end of 2000.

Technology Adoption by E-Commerce Websites, 2001

Shopping Cart Management Tools

60%

38%

Streaming Media

14%

17%

PDA access

2%

9%

XML*

14%

24%

B2C B2B

Note: *Planned adoption in coming yearSource: ActivMedia Research, 2001



39


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Advanced web searches were also in the process of being deployed byseveral internet retailers toward the end of 2001, increasing from 59% ofcompanies with this capability in 2000 to 73% of respondents in 2001.

Because internet retailers typically focus upon improving their websites intime for each year’s holiday shopping season, the fourth quarter hasbecome a benchmark period of sorts, for measuring the annual evolution ofinternet retailers’ technology capabilities.

In a joint study by the Direct Marketing Association and the e-tailinggroup, it was discovered that during the course of 2001, internet retailershad made considerable progress in reducing the number of times thatcustomers have to click through their websites before they could concludetheir online purchase.

On average, online customers had to click 8.76 times to complete atransaction on most internet retailers’ websites during the 2000 holidayseason, compared to just 5.36 times in 2001.

Average Number of Clicks to Checkout on US RetailWebsites during the Holiday Season, Q4 2000 & Q42001

Q4 2000 8.76

Q4 2001 5.36

Note: n=100Source: Direct Marketing Association/the e-tailing group, January 2002


US Retail Website Features, 2000 & 2001 (as a % ofwebsites surveyed*)

Automated e-mail service

91%

81%

Detailed product information

88%

50%

Advanced searches

73%

59%

2001 2000

Note: *n=200Source: AnswerThink, January 2002



40


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

It was also found that several B2C websites had begun to providepersonalization services to their customers in 2001, with 92% of the 100 retailwebsites surveyed by the e-tailing group having “my account” features.

A further 91% of retail websites offered customers the chance to sign upfor e-mail or newsletter updates, while 78% of internet retailers letcustomers view their order history or track their shipping status.

By contrast, online community features on B2C websites are much lesspopular among both internet users and online retailers.

Just 18% of respondents to the e-tailing group’s study posted customertestimonials on their websites, while even fewer had interactive capabilitiessuch as community bulletin boards or online chat.

In an effort to keep up with the competition, most online retailers now offertheir customers multiple shipping options at the time of purchase as well.This has largely come as a response to customers’ aversion to onlineshipping charges in general, which have been found in several studies to bethe largest deterrent to making online purchases.

US Retail Websites that Offer Personalized Features,Q4 2001 (as a % of websites reviewed*)

Offer some degree of personalized 'My Account' features 92%

E-Mail/newsletter updates 91%

Exclusive sales/offers 80%

Order history/status 78%

Note: *100 retail websites reviewedSource: the e-tailing group, November 2001


US Retail Websites Offering Community Features, Q42001 (as a % of websites reviewed*)

Testimonials 18%

Bulletin boards 15%

Clubs 11%

Chat 10%

Note: *the e-tailing group reviewed 100 retail websitesSource: the e-tailing group, November 2001



41


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

By the end of 2001, 93% of B2C websites let their customers choose amongmore than one shipping option, up from just under three-quarters ofinternet retailers in 2000.

Despite the perception that most internet retailers run their online shippingoperations as a profit center, survey results from the DMA show that 69% ofB2C websites instead charge only so much as to cover their shipping costs.

Nearly 20% of respondents to the DMA survey indicated that they settheir shipping fees so as to be competitive with other online retailers, while8% provide free shipping and handling in order to obtain business.

US Websites Offering Multiple Shipping Options, 2000& 2001 (as a % of respondents)

2000 71%

2001 93%

Note: n=200Source: answerthink.com, 2002


How US B2C Companies Price Their Delivery Chargesfor Online Sales, 2001 (as a % of respondents)

Cover expenses of outbound freight only

19%

Cover expenses of freight and shipping materials

24%

Cover expenses of freight, materials, and direct warehouse labor

26%

Charge relative to competition

19%

Charge as much as the market will bear

6%

Provide free shipping and handling year round

4%

Provide free shipping and handling during peak shopping periods

4%




42


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Shop.org and the Boston Consulting Group found that the average cost tofulfill online orders has increased slightly in 2001, rising from $11 per orderin 2000 to $14 per order today.

As an alternative to charging customers for shipping, Sears.com seems tohave met with success through its online delivery strategy, through whichcustomers are able to avoid shipping charges by picking up their onlinepurchases at in-store pick up centers.

During the 2001 holiday shopping season, Sears reported that 38% of itsonline shoppers decided to obtain their purchases this way. In the future,Sears estimates that as much as 50% of its online sales might be deliveredthrough its brick and mortar stores.

And if recent moves by Amazon.com are an indication of things to come,this coming holiday season may see increasingly tough competition amonginternet retailers’ shipping charges, as high-volume shippers willaggressively pursue business by taking advantage of their relative size andgreater efficiency.

US Internet Retailers' Average Fulfillment Cost perOrder, 1999-2001

1999 $12

2000 $11

2001 $14

Source: Shop.org and The Boston Consulting Group, June 2002



43


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Managing Website TrafficWhen it comes to promoting their internet storefronts, online retailers havebecome increasingly sophisticated in their use of both online and offlinechannels to drive website traffic.

Due in part to lower advertising rates, and thanks to the lessons that theyhave learned over the past three years, customer acquisition costs for B2Cwebsite operators have come down substantially as well.

For example, Shop.org and the Boston Consulting Group found that USinternet retailers’ customer acquisition costs had fallen 63% between 1999and 2001, from $38 per customer in 1999 to $14 per customer last year.

Among the most basic methods of promoting their websites, retailers and manufacturers typically include their website’s URL in their advertising across all media, and they are increasingly including it on most of their packaging.

US Internet Retailers' Average Customer AcquisitionCost per New Customer, 1999-2001

1999

$38

2000

$29

2001

$14

9

27

45




44


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Online retailers and manufacturers are driving website traffic through acombination of online promotion and direct mail marketing as well,according to the results of the DMA’s 2001 study. While online advertisingand e-mail marketing provide the most rapid results for any promotionalcampaign, internet retailers have found that traditional techniques such asdirect mail marketing continue to be an effective means of gainingcustomers’ attention as well.

In its late-2001 study, Catalog Age magazine found that on average, 52.5%of respondents to its survey said that they used website analysis tools totrack the movements of their website visitors.

How US B2C Website Operators Drive Website Traffic,2001 (as a % of respondents)

E-Mail marketing 67%

Direct mail 64%

Online advertising 55%

Search engine optimization 49%

Print ads 47%

Offline promotions 38%

Paid search engine placement 35%

Online promotions 28%

Sponsorship of e-newsletters 22%

Incentive programs 17%

Television ads 15%

Other 14%




45


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Large online catalogers were much more likely to be using website analysistools than their smaller counterparts, as many of the smaller companiessaid that they did not want to spend the extra money on analysis software,nor could they afford the extra man-hours required to analyze the data thatthey might have collected.

The Direct Marketing Association found in its survey of online retailers that88% of respondents were at the very least able to identify new visitors totheir websites, while an additional 78% of website operators were able toidentify repeat customers.

It was also discovered that a further 51% of companies were able to gatherinformation about their website visitors, so that they could distinguishbetween their regular online and offline customers, or segment their onlinecustomers in some other way.

Percent of Catalog Companies Using Website AnalysisTools to Track Visitor Usage, by Company Size, 2002

Sales of $50 million+ 67.6%

Sales of $10 million - $49.9 million 55.8%

Sales of $1 million - $9.9 million 43.5%

Sales of less than $1 million 30.4%



Percent of US B2C Websites that Use Applications toIdentify Website Visitors, 2001

Able to identify new customers 88%

Able to identify repeat customers 78%




46


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Just over two-thirds of B2C website operators said that they were able totrack their customers’ online purchase history, while 61% of respondentssegmented their online customers by demographic group.

eMarketer has also found that some of the more advanced internet retailershave begun to use customer loyalty programs to track their customers’online and offline purchase patterns, thus providing them with a true 360-degree view of their most valued clients. This is typically accomplishedthrough the use of incentive programs’ customer identification numbers,which clients must use with a plastic card for in-store purchases, or arerequired to enter when making online purchases.

As for the traffic that is generated by their promotional activities, mostB2C website operators in the DMA survey said that they receive less than1,000 unique visitors to their websites on a daily basis.

How US B2C Website Operators Segment their OnlineCustomers, 2001 (as a % of respondents)

Purchase history 67%

Demographics (income, age) 61%

Location/zip code 59%

Lifestyle/hobbies/interests 53%

Estimated lifetime value 37%

Other 8%




47


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

But while 46% of respondents had less than 1,000 unique visitors, another28% of respondents had between 1,000 and 10,000 daily website visitors.Those websites with 40,000 or more daily visitors made up a significant16% of B2C companies as well.

On average, most B2C website visitors viewed between 1 and 10 pages onrespondents’ websites, with the greatest portion of visitors viewing between6 and 10 pages.

By comparison, 47% of B2B website visitors did not usually view morethan 5 pages, while an additional 39% of B2B website visitors viewedbetween 6 and 10 pages.

Average Number of Page Views by Visitors to US B2CWebsites, 2001 (as a % of respondents)

1 to 5 28%

6 to 10 44%

11 to 20 22%

21 to 50 3%

50 to 75 1%

76 to 100 1%

100+ 1%



Average Number of Daily Unique Visitors to US B2CWebsites, 2001 (as a % of respondents)

Less than 100 19%

100 to 1,000 visitors 25%

1,000 to 3,000 visitors 14%

3,000 to 10,000 visitors 14%

10,000 to 20,000 visitors 8%

20,000 to 40,000 visitors 5%

40,000 visitors or more 16%




48


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

In terms of gauging the volume of traffic among the largest retail websites,Amazon.com had just under 31 million visitors, or roughly 1 millionvisitors per day, during the month of December, 2001.

Other leading websites such as barnesandnoble.com averaged more than336,000 visitors per day during the peak holiday shopping season, whileBestBuy.com had an average of 254,000 visitors per day last December.

As for examples of the sales volume that some of the leading internetretailers typically see, J. Crew’s JCrew.com posted sales of $10.9 million inJune 2002, up slightly from $10.0 million the year before.

J.Crew’s online operations took in 16.6% of the company’s entirerevenues in June 2002, an increase of 2% from June 2001.

Top 10 Retail Websites, by Monthly Traffic, December2001 (in thousands of visitors)

Amazon 30,957

eBay 28,316

American Greetings 22,946

Columbia House 11,262

BizRate.com 10,771

Barnes & Noble 10,437

CoolSavings.com 9,455

Hallmark 9,000

Sony Online 8,971

BestBuy.com 7,876

Source: Jupiter Media Metrix, Inc., 2002; Internet Retailer, 2002


E-Business Profile: Online Sales at JCrew.com, June2001 & June 2002 (as a % of total company revenues)

June 2001 14.6%

June 2002 16.6%

Source: Internet Retailer, 2002



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B2B Websites


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By comparison, Lands’ End posted online sales of $218.0 million last year,up from sales of $138.0 million in 2000. The company has since beenpurchased by Sears, due in part to the success of its online operations,which capitalized upon its longtime strengths in order fulfillment anddirect marketing as a catalog retailer.

Landsend.com furthermore boasted a conversion rate of 14.7% amongwebsite visitors that wound up making an online purchase. This issignificantly higher than the average conversion rate among retailwebsites, which Shop.org estimates was 3.1% in 2001.

By many accounts, Amazon.com is the Wal-Mart of the internet, with onlinesales growing 13% in 2001 to reach $3.12 billion. More than one-quarter ofAmazon’s sales came from outside of the United States last year, with theUnited Kingdom and Germany being its two largest foreign markets.

E-Business Profile: Sales via Landsend.com, 2000-2002(in millions)

2000 $138.0

2001 $218.0

2002* $299.0

Note: *projectedSource: Land’s End, 2002


Order Conversion Rate among Online Buyers in theUS, 1999-2001 (as a % of website visitors)

1999 1.8%

2000 2.2%

2001 3.1%



E-Business Profile: Amazon.com's Annual Sales, 2000& 2001 (in billions)

2000 $2.76

2001 $3.12

Source: Amazon.com, 2002



50


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Amazon reportedly had 25 million customer accounts in 2001, growingfrom 20 million in 2000 and 14 million in 1999.

It also ranked at the top of Retail Forward’s list of the top 50 retailers for2001, with Amazon’s online sales accounting for 22% of all online salesamong the top 50 internet retailers.

Retail Forward has also noted that 8 of the top 10 internet retailers weremulti-channel retailers, up from 5 of the top 10 in 2000 and just 3 in 1999.

Top 10 US E-Retailers Ranked by Online Revenues,2001 (in billions)

Amazon.com $3.12

Office Depot $1.60

Staples* $0.95

Gateway, Inc.* $0.76

Costco Wholesale* $0.45

Barnesandnoble.com $0.41

Buy.com* $0.40

QVC.com* $0.35

Spiegel Group $0.33

J.C. Penney $0.32

Note: To be considered for the Retail Forward Top 50 E-Retailers, thecompany has to generate 50% of sales from direct-to-consumer (DTC)retail operations; *estimated revenues Source: Retail Forward, July 2002



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Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

B. Consumer PreferencesWhen it comes to promoting their online storefronts, most online retailers arenow using a mix of online and offline promotional techniques to generatetraffic, ranging from e-mail marketing to direct mail and banner ads.

From the perspective of online consumers, a growing number of internetusers appear to have a clear destination in mind when they choose to visit aparticular website. Survey data by WebSideStory shows that in early 2002,more internet users are arriving at websites through direct links orbookmarks than by surfing their way through numerous websites to reachtheir final destination.

Not surprisingly, thanks to their growing familiarity with the internet,online consumers are beginning to take a much more utilitarian approachto going online.

Indeed, internet users are increasingly using the web as a convenient toolfor quickly accomplishing any number of tasks, from getting caught up onthe latest weather forecast, to purchasing movie tickets, or buying a friend’sbirthday present. Many users are experimenting less online, and insteadgoing directly to their favorite websites, where they know they will be ableto get the product or information they need, whenever they want it.

For those companies that operate consumer-facing websites, this means that it is necessary for them to continue to modify their company’sinternet presence in order to meet the increasingly discerning needs of theirwebsite visitors.

Among American internet users, ease of navigation is one of the moreimportant features that they consider when deciding whether they mightreturn to a particular website.

How Internet Users Arrive at Websites, 6 February2002 & 6 February 2001

6 February 2002

51.67%

46.07%

6 February 2001

47.92%

52.91%

Direct navigation orbookmarks

Web links or search engines

Source: WebSideStory, February 2002



52


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Trust in the quality of a website’s information is also important to USinternet users, as well as the frequency with which that information isupdated, and the ease with which users can identify its source.

Most Important Website Features for US InternetUsers, 2002 (as a % of respondents)

Site is easy to navigate and to find what you want

80%

Being able to trust the information on the site

80%

Being able to easily identify the sources of information on thesite

68%

Knowing the site is updated frequently with new information

65%

Being able to find out the important facts about the site

50%

Knowing who owns the site

32%

What businesses and organizations financially support the site

24%

Site displays seals of approval from other groups

19%

Site displays awards and certificates from other groups

9%

Source: Princeton Survey Research Associates for Consumer WebWatch,January 2002



53


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

In taking the pulse of internet users’ satisfaction with the internet as it istoday, research firm Taylor Nelson Sofres (TNS) found that most people saidthey were satisfied with the quality of content that they found online.Several internet users also indicated that they were happy with websitenavigation features, as well as the depth of information that is available onthe websites they visit.

On the other hand, significant numbers of internet users said that they wereunhappy with the regularity with which website content was updated. Aboutone-third of respondents to the TNS survey also said that they were eitherindifferent or dissatisfied with the quality of website search tools, along withthe speed with which they are able to download online information.

This latter point, however, should likely become less of a concern, asbroadband adoption gains further momentum.

Looking more closely at those website design features that are mostimportant to US consumers, Knowledge Systems & Research (KS&R) hasfound that after ease of navigation, internet users place a priority uponbeing able to download information from the websites they visit as quicklyas possible.

Consumers have also placed a high value upon the quality of the onlinecontent that they find, which is closely related to the frequency with whichthat content is updated.

Website Features that Internet Users Worldwide AreHappy or Satisfied with, 2001-2002 (as a % ofrespondents)

Quality of website content 72%

Site navigation 71%

User friendliness 69%

Exhaustiveness of content 68%

Source: Taylor Nelson Sofres, May 2002


Website Features that Internet Users Worldwide AreUnsatisfied with or Indifferent Toward, 2001-2002 (asa % of respondents)

Regularity of content updates 37%

Ability to personalize the site 33%

Quality of search tools 32%

Download speed 32%

Source: Taylor Nelson Sofres, May 2002



54


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Not surprisingly, most customers are not visiting commercial websites to beentertained, or to necessarily have fun. Nor are they overly concerned with awebsite’s aesthetics, although a minimum standard of quality should beadhered to. Rather, online consumers are primarily going to internet websitesfor a specific need, and the more capable a website is at meeting those needsin a convenient and timely manner, the more successful it will be.

Respondents to KS&R’s survey were further asked to distinguish betweenthose features of informational websites that they considered mostimportant, compared to those of retail shopping websites.

Most Important Website Design Features for USOnline Consumers, 2001 (as a % of respondents)

Ease of use/navigation 78%

Fast download time 67%

Quality of content 60%

Regularly updated information 55%

Access to customer service 51%

Organization of content 45%

Search engine provided by the site 25%

Front page layout 24%

Quantity of content 23%

Aesthetics (look and feel of site) 22%

Fun 21%

Inclusion of animated graphics 8%

Note: n=990Source: Knowledge Systems & Research, April 2001



55


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Not unexpectedly, ease of use, quality of content and rapid download times were among the most important features of user-friendlyinformational websites.

By contrast, ease of order processing and security features were mostimportant for users of online shopping websites. Consumers also indicateda preference for ease of navigation on shopping websites, while fun andwebsite aesthetics were again at the bottom of their list.

Key Characteristics of User-Friendly InformationalWebsites, 2001 (as a % of respondents)

Ease of use/navigation

81%

Quality of content

58%

Fast download time

53%

Organization of content

27%

Personalization of content

16%

Search engine provided on website

13%

Ability to access printer friendly files

13%

Provision of exclusive or proprietary information

9%

Layout of front page

9%

Fun

9%

Quantity of content

8%

Access to customer service

8%

Aesthetics (look and feel of website)

5%




56


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Interestingly, personalization features also ranked low among consumers, whodid not seem to find such additions to add to the usability of retail websites.

Among the main reasons that internet users say they will not make onlinepurchases, there are some basic concerns that online retailers can addressby making improvements to their websites.

Besides adjusting their website’s navigability, adding customer servicefeatures and offering multiple shipping alternatives are two effectivesolutions that online retailers have used to encourage online purchases.

Key Characteristics of User-Friendly ShoppingWebsites, 2001 (as a % of respondents)

Easy order processing

68%

Security features

65%

Ease of use/navigation

42%

Quantity of information on available products

28%

Variety of products available

27%

Access to customer service

22%

Fast download time

20%

Organization of product selections

13%

Personalized recommendations based on past purchases

7%

Search engine provided on the website

6%

Layout of front page

2%

Fun

2%

Aesthetics (look and feel of website)

2%




57


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Reducing the amount of rich media content is another way to makewebsites more user-friendly, since this in turn makes websites faster todownload. Despite the fact that broadband use continues to grow, websiteoperators need to be aware that many of their customers may continue toaccess the internet through dial-up connections for quite some time.

According to research conducted by Retail Forward, approximately one-thirdof online shoppers said that they no longer go to specific websites where theyhave had frustrating shopping experiences in the past. Among the leadingfrustrations cited by consumers are pop-up ads, banner ads and congestedweb pages that are cluttered with too much advertising or other images.

Analysts at Retail Forward have noted, however, that customers are not somuch turned away from making online purchases by website ads as theyare by website navigational problems. Most shopping cart abandonmenthas therefore come as a result of navigational issues.

Indeed, Knowledge Systems & Research has discovered that on average,consumers become frustrated after having to click more than 6 times on awebsite that they are visiting.

Main Reasons US Internet Users Do Not Buy Online,20011 Poor/slow/non-existent customer service options

2 Privacy: fear or reluctance to disclose personal info and data

3 Higher total order prices than offline (including high shipping charges)

5

6

Confusing site structure/cannot find product info

4 Security: potential for credit card fraud, hackers, etc.

7

Not able to see/feel/test merchandise (where applicable)

8

General lack of trust in vendor

9

Inability to return goods

10

Site pages take too long to download

Out-of-stock merchandise

Source: eMarketer, 2001


Most Common Frustrations of US Online Shoppers, 2001 (as a % of online shoppers)Pop-up boxes when visiting a site 52%

Banner advertisements 50%

Congested webpages (e.g., too many advertisements, images, orinformation on webpages)

35%

Slow load times 26%

Difficult to find a specific product 20%

Source: Retail Forward, December 2001



58


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

The most common reaction at this point is for visitors to move to anotherwebsite, while just 13% of the people that KS&R studied tried to use thewebsite’s search feature to find the information that they were after.

In contrast to Retail Forward’s findings concerning shopping cartabandonment, the Vividence Corporation found that most internetconsumers abandon shopping carts because of the high shipping costsassociated with making online purchases.

US Consumers' Most Likely Action Taken WhenFrustrated by Too Many Clicks on a Website, 2001 (asa % of respondents)

Move to another website 83%

Use search functionality on the website 13%

Call customer service 2%

Ask a friend/family member/colleague for assistance 1%

Quit search 1%




59


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Several consumers also claimed that they did not conclude their onlinetransactions because they were either comparison shopping, or they hadsimply changed their minds about the products they were looking at.

With 61% of respondents to the Vividence study indicating that they werecomparison shopping or browsing online, it is also likely that many ofthese online shoppers ultimately prefer to conclude their transactions atonline retailers’ brick and mortar stores.

Further evidence of this was discovered in Shop.org’s annual survey ofonline retail sales, which interviewed more than 48,000 US shoppers duringthe month of March 2002. The study found that 73% of respondents said thatthey research some of their purchases online, before coming in to the store.

US Online Consumers' Top Reasons for Shopping CartAbandonment, 2001 (as a % of respondents)

High shipping prices

72%

Comparison shopping or browsing

61%

Changed mind

56%

Saving items for later purchase

51%

Total cost of items is too high

43%

Checkout process is too long

41%

Checkout requires too much personal information

35%

Site requires registration before purchase

34%

Site is unstable or unreliable

31%

Checkout process is confusing

27%

Source: Vividence Corporation, October 2001



60


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Among those goods that internet users were most likely to research onlinewere consumer electronics, clothing, personal computers and toys.

A significant 34% of respondents to the Shop.org study said that theyshopped in all three retail channels – in-store, via catalog and online. Afurther 78% of online shoppers said that they made purchases both in thestore and online. And it was found that online shoppers were also the biggestspenders, spending an average of $600 more than single-channel shoppers.

A separate study conducted by Retail Forward found that a significantportion of online retail sales are incremental, with 31% of respondents toits early 2002 study saying that their online purchases would not have beenmade if they had not made the purchase online.

As for those website features that consumers say would induce them tomake more online purchases, the ability to view products more closely wascited as the leading feature among respondents to PricewaterhouseCoopers’survey of online shoppers. This supports the analysis of Forrester Research,which has recommended that enhanced viewing features are best suited for“convenience” goods, such as toys or clothing.

Products that US Internet Users Research Online andSubsequently Buy at Retailers' Stores, 2002 (as a % ofrespondents)

Consumer electronics 38%

Clothing 23%

Personal computers 22%

Toys 17%

Home accents/housewares 13%

Major appliances 12%

Furniture 9%

Sporting goods 9%

Source: Retail Forward, June 2002



61


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

More than one-third of online consumers said that information aboutproduct availability and product comparison guides would increase theirlikelihood of making online purchases. The study also found that consumerproduct reviews and the provision of a 1-800 customer service numberwere helpful inducements for turning online shoppers into buyers.

Because a growing number of website operators would like to gatherinformation about their online customers, internet users are increasinglybeing asked to provide personal information at the websites they visit.

Most websites offer some kind of inducement in exchange for thisinformation, ranging from product discounts to the chance to win freeprizes. Knowledge Systems and Research discovered that most consumersare interested in receiving personalized or useful information in exchangefor the personal information that they provide, while the assurance thattheir information will remain private is also important.

Features Likely to Increase Online Purchasing in theUS, 2001 (as a % of shoppers indicating feature mayincrease purchasing)

"Close-up" product images 44%

Product availability 39%

Product comparison guides 34%

Search function 30%

1-800 Customer service number 25%

Consumer reviews/evaluations 24%

Catalog quick order 24%

Note: n=547Source: PricewaterhouseCoopers (PwC), 2001



62


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

KS&R found that the promise of improved online services was of lowinterest to most respondents to its survey, for which more people said thatthey expected nothing in return for their personal information.

Taking a closer look at the profile of those internet users who say that theyvalue personalization features, a greater proportion of them appear to becomfortable with making online purchases, with 28% of them spendingmore than $2000 online in 2000, compared to 18% of people who did notvalue personalization.

A further 21% of respondents who value personalization said that theywere willing to pay for online subscriptions, compared to just 11% ofpeople who did not want personalization.

It is worthwhile to note the difference between personalization andcustomization, however. As Forrester Research explains it, customizationrequires a website user to actively select his or her own preferences, whilepersonalization anticipates the needs or interests of a passive user, oftenrelying upon past behavior to make recommendations.

US Consumers' Expectations of Website Operators inExchange for the Provision of Personal Information,2001 (as a % of respondents)

Useful/personalized information 29%

Security/privacy 23%

Discounts/free stuff/gifts 22%

Better services 12%

Nothing 17%



Online Spending Habits of US Consumers Who ValuePersonalization Features, March 2001 (as a % ofconsumers surveyed)

Spent more than $2,000 online in 2000

28%

18%

Pay for online subscriptions

21%

11%

'Personalizers' 'Non-personalizers'

Source: Cyber Dialogue, The Personalization Consortium, 2001



63


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Examples of websites that have successfully implemented customizationfeatures include Dell.com, Amazon.com and Orbitz.com, each of whichpermits users to select or assemble products according to their needs.Amazon.com is frequently cited as an example of a successful adopter ofpersonalization features as well.

There is some controversy over the effectiveness of customization,however, as several observers such as Professor Peter S. Fader of theWharton School, feel that customization is more trouble than it is worth.

“…the promise of customization has been a near-complete bust. Many people don’t really want it,and companies have a hard time doing it.”– Peter S. Fader, Wharton School

This is especially true for online clothing vendors who have tried sellingcustom-designed clothes, or proponents of the concept of build-to-ordercars. Professor Fader has gone on to note that since many people do notwant a high level of customization, the expense of providing it does notactually meet most consumers’ needs.

On the other hand, customization on informational websites has beenmuch more successful, especially as it pertains to regular visitors of newsand financial websites, or subscribers to internet information services.My.Yahoo.com is an example of one of the more successful customizationservices that are offered by information portals.

As for those internet users who make use of customized web pages, KS&Rfound that 54% of respondents to its survey said that they used customizedwebsites, while the remaining 46% of respondents said that they did not.

Frequency with Which US Users of CustomizedWebpages Update Their Specifications/Preferences,2001 (as a % of respondents)

Once every two weeks or less 15%

Monthly 24%

Quarterly 30%

Bi-annualy 15%

Annually 9%

Never 7%

Source: Knowledge Systems & Research, April 2001



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Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

About 30% of respondents to its survey said that they updated theircustomized web pages on a quarterly basis, with 15% of people makingchanges at least once every two weeks and 24% of respondents adjustingtheir customized pages once per month.

Younger internet users were also more likely to use customized webpages than older internet users.

And finally, when it comes to paying for online content, the Pew Internet& American Life Project found that a narrow 12% of internet users arewilling to pay for access to a website that they had previously used for free.

On the other hand, 50% of the 233 respondents said that they had goneand found a free alternative, while 36% of internet users indicated thatthey had simply stopped getting free information online. Those internetusers with less than one year of online experience were the most likelypeople to stop using the internet as a resource.

In total, 17% of the 1,351 internet users surveyed by the Pew Internet &American Life Project said that they had been asked to pay for access to awebsite that they had been using for free.

Action Taken by US Internet Users After Being Askedto Pay for Access to a Previously Free Website, 2001(as a % of respondents)

Found a free alternative

50%

Completely stopped getting that information or service online

36%

Agreed to pay for access

12%

Note: n=233Source: Pew Internet & American Life Project, 2001


IIIMethodology 5

I Introduction 9

II B2C Websites 23

III B2B Websites 65




Index of Charts 117


65



66


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

A.Website CapabilitiesCompared to their consumer-facing counterparts, business-to-businesswebsites continue to lag behind in their level of online customer serviceand sell-side capabilities.

Although many B2B websites have made some strides in the past twoyears, most companies have taken a conservative approach to thedevelopment of their websites, thanks in part to the collapse of the internetbubble, the slowdown in IT spending, and uncertainty about the future ofboth public and private B2B exchanges.

Indeed, while large corporate purchasing departments wereimplementing e-procurement applications during the dot-com boom, thecommon question by the end of 2000 had become, “Where are thesuppliers?” Survey data in early 2001 showed that although as many as60% of businesses were ready to buy via the internet, just 15% of supplierswere prepared to sell online.

Even now, most businesses have made slow progress in the development oftheir online presence. While the majority of companies operate a home pageand corporate intranet, there is still a relatively small percentage of companiesthat are able to conclude business-to-business transactions online.

Besides the fact that sell-side e-commerce initiatives can be complicatedto implement, many companies have furthermore prioritized buy-side oversell-side e-commerce projects, which typically provide a faster return oninvestment, in part because they are easier to implement.

According to the Direct Marketing Association’s (DMA) late-2001 study ofUS companies, 71% of business-to-consumer websites said they were ableto process transactions online, compared to just 20% of business-to-business websites that could make the same claim.

Internet Capabilities Deployed by US Companies, 2001(as a % of respondents)

Home page 98%

Intranet 95%

Links to other company websites 88%

E-Commerce 78%

Customer extranets 72%

Supplier extranets 59%

Interactive e-communities 40%

Wireless (m-commerce) capabilities 17%

Source: The Conference Board, December 2001



67


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Another study of North American companies that was conducted inNovember of 2001 posted similar results, finding that about 55% ofbusinesses’ websites were primarily designed to provide information, withjust 17.1% of respondents saying that they had the ability to conductinternet-based transactions.

The DMA has found that most B2B companies’ websites serve as brochure-ware, placing a greater emphasis upon providing information aboutproducts and services, generating sales leads, or acting as a platform forpublic relations or company advertising.

2000 2001

Transact14.6%

Interact19.2%

Inform59.6%

Deliver6.6%

Do nothave awebsite0.0%

Do nothave awebsite1.2%Transact

17.1%

Interact19.2% Inform

54.6%

Deliver8.0%

North American Companies' Website OperatingCapabilities, 2000 & 2001 (as a % of respondents)

Source: Computer Sciences Corporation (CSC), 2001



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Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Just 25% of respondents to the DMA study said that their B2B websiteswere primarily focused upon conducting online sales, underscoring thelower priority that B2B companies have assigned to developing the internetas a sales channel.

On the other hand, it is worthwhile to note that the nature of business-to-business trade is very different from that of consumer sales.

For many products, relationships between businesses are typically morestable than those between consumers and retailers. And although somebusiness-to-business products such as office supplies or MRO goods maybe readily sold online, many other business transactions require lengthyoffline negotiations, the establishment of credit and payment terms, andthe arrangement of delivery schedules.

Primary Purpose of US Companies' B2B Websites,2001 (as a % of respondents)

Provide information about products and services

96%

Lead generation

68%

Public relations/image enhancement

56%

Advertising

40%

Sales/e-commerce

25%

Customer service

22%

Gather e-mail addresses (not for lead generation)

22%

Human resources management

12%

Technical support

11%

Conduct survey/market research

10%

Build online community

10%




69


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

As a result, the development of websites for transactional purposes is lessrelevant to companies that sell to other businesses. Instead, several business-to-business trading partners have implemented more robust privateexchanges or customer portals, which go beyond simple transactionprocessing to provide established customers with other value-added services.

And because private extranets require a great deal more time to plan andimplement, it is understandable that B2B suppliers have not made as muchprogress selling online as their B2C counterparts.

Many small businesses have adjusted their expectations for their websiteoperations during the past several years as well, relying less upon theinternet as a channel for generating sales into new markets, and insteadusing their websites to improve customer service.

Indeed, Jupiter Media Metrix found in a mid-2001 survey that 71% ofB2B suppliers said they had seen no growth in market share, thanks to theirinternet presence.

Fulcrum Analytics also discovered that while 36% of small businessesbelieved that their websites would increase sales in 1998, just 19% ofrespondents to its survey expected that their websites would generate newsales via the internet in 2001. Instead, 27% of US small businesses said thatthey expect their online presence to help generate more offline sales.

Reasons Why US Small Businesses Have a Website,1998 & 2001 (as a % of respondents)

Expand geographic territory

37%

34%

Increase sales (online and offline)

36%

46%

Keep up with competitors

12%

39%

Cut marketing costs

12%

26%

Improve customer service

2%

39%

1998 2001

Source: Fulcrum Analytics, 2002



70


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

The Yankee Group has found that three-quarters of businesses use theircorporate websites to post company announcements and relatedinformation. It has also discovered that 63% of corporate websites providesearch capabilities for their products and services, and 55% offer some kindof customer support or service.

Once again, a relatively small 24% of the websites studied had onlineorder processing capabilities.

Of the most common features that are used on B2B websites, the DMAfound that 63% of the 130 companies it surveyed required users to login togain full access to their websites.

Features Offered on Corporate Websites Worldwide,2001 (as a % of respondents)

Corporate announcements 75%

Search capabilities for products and information 63%

Customer support and services 55%

Product demos 27%

Order processing 24%

Customize personal information 22%

Other 13%

Supply chain management 8%

Source: Yankee Group, December 2001



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Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Online newsletters were another popular feature that was offered on severalB2B websites, while few websites provided online chat for customer serviceor wireless capabilities.

Of course, most businesses do not see their online presence as a staticcondition, with several companies continuously modifying their websitesby slowly adding features and making changes over time. With 62% of B2Bwebsites having three or more years’ of experience according to the DMA,there are several B2B firms that will likely develop next-generationwebsites within the next two years.

Website Features and Functions Offered on US B2BWebsites, 2001 (as a % of respondents)

Subscriber/user login

63%

E-Newsletters

61%

Dynamic page creator

42%

Personalization platform

29%

Targeted ads

27%

Pop-up offers

17%

Online chat with customer service

17%

Recommendation engine

14%

Wireless PDA/PDA version

14%

WAP enabled (Wireless Application Protocol)

13%




72


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

These findings are supported by a separate November 2001 study of USsmall businesses that was conducted by Verizon Superpages.com, whichfound that 62% of the small companies that currently have a website planto redesign their websites within the next year.

The DMA found that B2B companies market an average of 10 items viatheir websites, but typically sold an average of 275 items through theironline catalogs. Online catalogs are usually electronic versions oftraditional paper catalogs, and are often made available through resellersor via private portals to large customers.

Nonetheless, despite the ability of many B2B companies to market theirproducts online, very few were able to conclude transactions via theirwebsites as of late-2001.

Primary Designers of US Small Business Websites,2001 (as a % of respondents)

Internal resources 48%

Outside resources 43%

Don’t know 12%

Note: Some respondents reported a collaboration between internal andexternal resources, thus total adds to 103%Source: Fulcrum Analytics, 2002


Do not conductfinancial

transactions80%

Able toconductfinancialtransactions20%

Percent of US Companies' B2B Websites Able toConduct Financial Transactions, 2001




73


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Among those B2B websites that are able to conduct online transactions, theaverage order size was $350 in 2001, which is significantly higher thanconsumer websites’ average order size of $68. The average value of onlinecatalog transactions was significantly lower than website sales for B2Bcompanies, at $185.

In a sign that businesses are in the process of streamlining their internetoperations, nearly three-quarters of B2B websites, at 74% of respondents tothe DMA study, expected to have profitable online operations by the end of2002, with 27% of the companies in the survey saying that they wouldhave profitable operations by the end of 2001.

Turning to the number of visitors that B2B websites typically handle, itshould come as little surprise that website traffic on B2B websites is muchlower than that seen on their B2C counterparts. While 81% of theconsumer-facing websites surveyed by the DMA had web traffic exceeding100 unique visitors on any given day in 2001, just 37% of business-to-business websites could make the same claim.

Average Dollar Value* of US B2B Companies' OnlineTransactions, 2001

Via company website $350

Via online catalog $185

Note: n=206; *excludes S&H, taxes and other add-onsSource: Direct Marketing Association, April 2002


Average Number of Daily Unique Visitors to US B2BWebsites, 2001 (as a % of respondents)

Less than 100 63%

100 to 1,000 visitors 20%

1,000 to 3,000 visitors 7%

3,000 to 10,000 visitors 4%

10,000 to 20,000 visitors 3%

20,000 to 40,000 visitors 1%

40,000 visitors or more 2%




74


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

In its annual look at the cost of building and designing commercialwebsites, BtoB Magazine has found that the price tag can range from a lowof $20,000 for a small project to as much as $675,000 for a large project.As part of its study, 20 different developers were asked to bid on threeseparate projects that varied in size and complexity. Integration work wasnot included in these estimates.

The small project was for a hypothetical law firm that required basicdesign work for a hosted website that would primarily serve as brochureware. The mid-size project required a website to be designed for a fictitioussoftware developer that needed an e-commerce engine, secure hostingservices, bulletin board and user registration system. The site was alsorequired to provide customer access to a database for user support.

Bids for the small project topped off at $100,000, while the high price for the mid-size project was $215,000. Median prices for the small andmid-sized projects were $65,000 and $125,000 respectively.

The large project was for a hypothetical portal used in the restaurantindustry, described as already having 25,000 registered users. This mid-sizeportal was said to be planning to move into a second-generation phase thatwould offer vendors the ability to manage and update their online catalogs.

Website Development Costs for a Small and MidsizeProject, 2001Small project

High price $100,000

Median price $65,000

Low price $20,000

Midsize project

High price $215,000


Low price $40,000

Source: BtoB Magazine, 2001



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Introduction

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The portal also wanted to permit buyers to securely register and managetheir own accounts, and store information on purchasing activity. Anonline industry-news service, content personalization, along with an e-mail list management and delivery system were also to be added featuresof this new website. The high price for this large project came in at$675,000, while the lowest bid was $86,000.

Compared to previous years, BtoB Magazine found that median prices forwebsite design stayed constant or declined, even though more complexfeatures were added to the survey in 2001. Large projects actually droppedsignificantly, from a median price of $608,000 in 2000 to just $250,000 in2001. By comparison, midsize projects went up in price, from $119,500 in2000 to $125,500 in 2001.

As an explanation of these changes, BtoB Magazine notes that there wasa spike in website development costs in 2000 when web developers wereoften turning away dot-coms and brick-and-mortar companies alike, dueto excessive demand. Of course, the market for website developmentservices has changed substantially since then.

BtoB Magazine also found that as companies moved into next-generationwebsites, the cost to expand them was significantly lower than their initialdevelopment cost.

For example, although the mid-size project added significantly morecomplex technology in the 2001 study, it resulted in only a very slight risein price. Overall, demand for website development work was found to havesubstantially declined since May of 2000, while developers’ growingexpertise has contributed to their ability to implement web design projectsat a faster speed, thus reducing labor costs.

Website Development Costs for a Large Project, 2001High price $675,000


Low price $86,000



Comparison of Median Prices for WebsiteDevelopment Projects, 1999-2001

September 1999 May 2000 May 2001

Large project $405,000 $608,000 $250,000

Midsize project $170,000 $119,500 $125,500

Small project $77,500 $113,500 $65,000




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When the DMA asked B2B website operators how much they expected tospend on website development in 2002, just 10% of respondents said thatthey had budgeted more than $500,000. Nearly half of B2B websiteoperators, at 49% of respondents, said that they planned to spend between$10,000 and $500,000 on their B2B websites this year, while 31% ofrespondents expected to spend no more than $5,000.

The DMA also found that when businesses break down their website budgets,the greatest portion of their spending is typically directed toward marketing.

The next highest expense is for a website’s ongoing operations,excluding staffing, which accounted for an average 25.2% of B2B websiteoperators’ spending in 2001. Staffing costs averaged 19.2% of B2Bcompanies’ website budgets, according to the DMA’s survey results.

US B2B Companies' Forecast Website DevelopmentBudgets, 2002 (as a % of respondents)

Nothing 10%

$1 to $5,000 21%

$5,001 to $10,000 7%

$10,001 to $50,000 25%

$50,001 to $100,000 11%

$100,001 to $250,000 6%

$250,001 to $500,000 7%

$500,001 to $1,000,000 5%

$1,000,001 to $7,500,000 5%



Breakdown of US Companies' Spending on their B2BWebsites, 2001

Marketing 37.4%

Operations 25.2%

Staffing 19.2%

Advertising 18.2%

New business development 16.9%

Merchandising 3.6%

Note: n=68; average spending per category, multiple responses allowedSource: Direct Marketing Association, April 2002



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Although only one-quarter of B2B website operators in the DMA study saidthat the primary purpose of their website is to generate sales, mostcompanies nevertheless evaluate the success of their online mediainitiatives by their impact upon sales.

Website operators have furthermore placed a high value upon the abilityof their internet initiatives to produce sales leads, as well as their ability toacquire e-mail addresses, which may be added to in-house campaign lists.

How US B2B Website Operators Measure the Successof their Online Media Initiatives, 2001 (on a scale of1-9*)Sales generated 2.3

Leads generated 2.4

E-Mail addresses collected 3.9

Hits on designated/unique urls 4.3

Cost per website visitor 5.0

"Hits" on home page 5.1

Cost per website customer 5.2

Learning/education 5.3

Other measures 6.2

Note: n=122; *1=most effective, 9=least effectiveSource: Direct Marketing Association, April 2002



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Not surprisingly, respondents to the Direct Marketing Association’s surveyhave considerable experience in using direct mail as part of theirtraditional promotional campaigns.

As a result, several B2B website operators appear comfortable using bothonline and offline direct marketing techniques to drive website traffic. Theuse of costlier search engine optimization, print ads and online advertisingare employed as well, showing that most website operators have animpressive understanding of how multimedia promotional techniques maybe combined to drive website traffic.

How US B2B Website Operators Drive Website Traffic,2001 (as a % of respondents)

Direct mail 55%

E-Mail marketing 52%

Search engine optimization 37%

Print ads 36%

Online advertising 24%

Offline promotions 22%

Sponsorship of e-newsletters 17%

Paid search engine placement 17%

Online promotions 11%

Incentive programs 7%

Television ads 2%

Other 23%




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Among the most basic customer service features that can be found on B2Bwebsites are e-mail customer service support and a toll-free number fortelephone-based support.

For those businesses that are developing next-generation websites, manyare adding customer self-service features such as the ability to checkproduct inventory levels, and order status tracking. Business-to-businesscompanies are finding that such features not only provide customers with aconvenient, value-added service, but they are helping to reduce customerservice costs as well.

Turning to the adoption of more advanced customer analytics capabilities,the DMA found that of the 176 business-to-business websites that itsurveyed, 82% of respondents were able to identify new customers thatvisited their website, but 64% were not able to distinguish between theironline and offline customers, or segment their online customers in any way.

Percent of US B2B Websites that Use Applications toIdentify Website Visitors, 2001

Able to identify new customers 82%

Able to identify repeat customers 64%



Online Customer-Service Features Offered by B2BWebsites, 2001

E-Mail customer support

96%

Toll-free phone number for customer support

67%

Text chat with online collaboration

4%

Source: Jupiter Media Metrix, 2001



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Of those that were able to segment their customers, 56% did so by theirpurchase history. Another 55% of websites segmented visitors by theirlocation, and 51% used customer demographics to distinguish betweentypes of customers.

eMarketer has found that the deployment of customer analysis tools hasnecessarily followed earlier implementations of online customer servicecapabilities. With many companies still deploying customer relationshipmanagement (CRM) systems during the course of 2001, customer analyticswas listed by companies in most surveys as a priority for 2002 and beyond.

How US B2B Website Operators Segment their OnlineCustomers, 2001 (as a % of respondents)

Purchase history 56%

Location/zip code 55%

Demographics (income, age) 51%

Estimated lifetime value 26%

Lifestyle/hobbies/interests 18%

Other 27%




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B. User PreferencesIn their latest quarterly survey of US companies’ e-business activity,Forrester Research and the Institute for Supply Management (ISM) notedthat American businesses’ use of the internet was continuing to see steadygrowth in 2002.

Of the 331 manufacturing and service sector firms that were studied,more than 64% of respondents said that they purchased direct materialsonline during the second quarter of 2002, while an even larger 84% of UScompanies went online to purchase indirect goods, such as office suppliesor janitorial equipment.

It is important to note, however, that most companies’ use of the internetremains at an early stage, with many businesses still only now beginning tomove beyond the pilot stage of their online purchasing operations. Thiswas confirmed by the Forrester/ISM study, which found that althoughseveral US companies were doing some online procurement, mostbusinesses were directing less than 10% of their overall purchasing activityvia the internet.

But while it will likely take several more years to migrate a larger portionof corporate purchasing online, many businesses have already embracedthe internet as an information and communications channel.

When it comes to staying on top of industry news, for example, businessleaders rely upon the internet because of its convenience, as well as theability for information providers to update news as it happens.

Percent of US Companies Buying DirectGoods/Services via the Internet, Q1 & Q2 2002

Q1 2002 53.3%

Q2 2002 64.6%

Source: Forrester Research, Institute for Supply Management (ISM), 2002


Percent of US Companies Buying IndirectGoods/Services via the Internet, Q1 & Q2 2002

Q1 2002 78.1%

Q2 2002 84.2%

Source: Forrester Research, Institute for Supply Management (ISM), 2002



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NFO WorldGroup surveyed 516 business executives during the first half of2002, finding that nearly three-quarters of decision-makers regularly useinternet websites to stay on top of industry news.

However, it is interesting to note that just 19% of business leaders said that they found the internet to be their most useful resource for selecting new suppliers, well-behind the 44% of respondents who named business publications.

Similarly, while 58% of executives said that they used businesspublications to keep abreast of the latest product launches within theirindustry, just 8% used internet websites, behind general businesspublications and direct mail.

Nonetheless, 79% of respondents to the NFO survey said that they foundB2B websites to be useful, with a further 79% of executives saying thatbusiness publications and websites complement each other.

As for those people who make buying decisions, although procurementprofessionals often play the most prominent role in making corporatepurchasing decisions, there are several other stakeholders that often havesome influence in how business spending decisions are made.

Operators of business-to-business websites have therefore had toconsider the interests of several people in addition to professional buyers,when designing their websites. And because most of these potentialcustomers are primarily involved in the sourcing stage of the purchasingprocess, it has been necessary to develop the informational aspects of theirwebsites as a priority.

Information Sources Used by Business Leaders toGain Information About their Industry's Sector, 2002(as a % of respondents)

Business publications 87%

Websites on internet 71%

Conferences/exhibitions 54%

National newspapers 46%

General business magazines 42%

Direct mail 42%

Regional newspapers 37%

Other online info services 28%

Television 27%

Radio 20%

Others 10%

Note: n=516Source: NFO WorldGroup, 2002



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Acceptance of the internet as a resource for sourcing activities occurredquickly among many purchasing professionals, but it is interesting to notethat during the past two years, their use of suppliers’ websites for sourcingproduct has remained constant.

Purchasing magazine has found that very few new purchasingprofessionals have joined their colleagues online during the past two years.

By comparison, just 23% of respondents to the Purchasing study said thatthey were using supplier extranets, while 74% of respondents indicated thatthey were using supplier directories as part of their online sourcing activities.

Stakeholders at US Manufacturing Firms thatParticipate in Sourcing Activities, 2002 (as a % ofrespondents)

Extensiveparticipation

Someparticipation

Purchasing/procurement 83% 15%

R&D/engineering 30% 54%

Suppliers 24% 54%

Production/manufacturing 21% 56%

Marketing/sales 11% 51%

Customers 9% 42%

Distribution 9% 33%

Source: IndustryWeek, 2002


Percent of US Purchasing Professionals UsingSuppliers' Websites for Sourcing, 2000 & 2002

2000 56%

2002 57%

Source: Purchasing Magazine, June 2002



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When Purchasing magazine asked its readers what features they wanted tosee on a supplier’s website in 1999, most listed product information as theirfirst priority. Quick access to customer service or sales assistance was alsohigh on their list, as most business users usually want the answers to anyquestions they may have as fast as possible.

In a survey released in early 2002, Thomas Register found in its IndustrialPurchasing Barometer Study that 91% of business buyers had gone to asuppliers’ website for product information, instead of using the telephoneto contact their suppliers.

A further 90% of respondents to the survey expected to find a full rangeof product information, from pictures of the products they were looking for,to shipping information, and even information about product guarantees.

Many buyers went on to say that they would give preferential treatmentto those suppliers who provided comprehensive online services, with 80% ofrespondents indicating that they would do so. Just over three-quarters ofrespondents, at 77% of business buyers, said that by providing detailedinformation online, suppliers show that they want their customers’ business.

In May of 2001, similar results from Jupiter Media Metrix showed that54% of business buyers would give preferential status to those supplierswho provided comprehensive customer service capabilities online.

A further 28% of the 406 purchasing executives surveyed by Jupiter saidthat they would migrate a significant portion of their business to supplierswho provided them with greater visibility into their supply chains, throughonline applications.

What B2B Buyers Want to See on Suppliers' Websites,1999

Product information 93%

Sales contacts 61%

Technical help 59%

Delivery information 55%

Order tracking 53%

Sales office locations 46%

E-Commerce capability 31%

Identify management 23%

Ability to interact 10%

Source: Purchasing Magazine, 1999



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Interestingly, most business buyers have said that the greater value ofinternet-based business-to-business interactions lies not in the actualtransaction itself, but in the pre- and post-sale content that a websiteoperator is able to provide.

Indeed, anecdotal information has shown that business buyers wouldmuch rather serve themselves online at their own convenience than have toplace multiple calls to customer service representatives or chase down salesreps through a series of phone calls.

This is especially true for minor queries that typically require minimalexpertise from customer service representatives, such as checking aproduct’s specifications or tracking an order’s shipping status.

When it comes to those features of online customer service that irritatebusiness buyers, many of the same problems listed by consumers areapplicable in the business world.

First among the complaints is the excessive number of clicks that arerequired to get to a desired area of a B2B website. Online business buyershave also listed navigational problems as a leading complaint, along withtoo much self-serving content that does not help them to accomplish whatthey would like to do at their suppliers’ website.

User Assessment of B2B Interactions, 2001

Value is in the transaction 29%

Value is in presale and postsale content 71%

Source: McKinsey & Co., 2001


Leading Complaints About B2B Websites, 2000

Too many clicks to get to desired area 78%

Confused by home page 65%

Distracted by self-serving content 61%

Got lost in the site 56%

Source: BroadVision, 2000



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Motive Communications has found in its survey of 200 business buyersthat 95% have abandoned the use of a particular website due to problemsthey have encountered while using it.

Among the leading difficulties cited by respondents to the study wereproblems associated with signing up for a service, researching a productand executing a transaction.

Just over one-third of business buyers in the study, at 36% of respondents,said that they were dissatisfied with the online customer service that theyreceived, with e-mail providing the least satisfactory results.

Perhaps more so for business buyers than online consumers, time is ofthe essence when it comes to obtaining online customer service. Surveysindicate that at the moment a business buyer encounters a problem orneeds an answer to a question, they appreciate the convenience of beingable to pick up a phone, or the ability to receive an instant response froman online customer service rep, so that they can complete whatever taskthat they have set out to do.

For B2B website operators, it is important to remember that as with onlineconsumers, business buyers are increasingly going online to accomplishspecific tasks. The most successful websites are designed with thisutilitarian perspective in mind.

To the extent that a business website is able to anticipate the needs of itsusers, and not so much the sales-focused interests of its operator, the moresatisfied customers will be, and the more likely they will return to interactin the future.

Leading Problems that US Business Buyers HaveEncountered with Websites, 2001 (as a % ofrespondents)

Signing up for a service 85%

Researching a product 81%

Executing transactions 75%

Source: Motive communications/Critical Research, 2001


Percent of US Business Buyers Listing Their OnlineCustomer Service Experience as Satisfactory, byService Channel, 2001

Online chat/instant messaging 32%

Telephone 22%

E-Mail 15%

Source: Motive Communications/Critical Research, 2001


IVMethodology 5

I Introduction 9

II B2C Websites 23

III B2B Websites 65




Index of Charts 117


87



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A.Website CapabilitiesAccording to its definition of the worldwide market for sell-side e-commerce software, AMR Research includes software that helps runwebsites, private extranets, and those applications that enable onlinecustomer service.

With very few companies having implemented sell-side e-commercesystems prior to 1999, this market has tripled in size through 2002 to reach$9.0 billion, according to AMR Research.

Sell-side e-commerce software sales are forecast to see continuedstrength during the next two years, growing to $14.0 billion by 2004, asbusinesses develop robust sell-side private exchanges that better serve theirdemand chain partners and online customers.

With online customer service capabilities expected to account for asignificant portion of next-generation websites’ new offerings, softwareindustry analysts are predicting that the narrower electronic customerrelationship management (eCRM) market will achieve sales of more than$10 billion by 2005.

Estimated Worldwide Sell-Side E-Commerce SoftwareSales, 2000-2005 (in billions)

2000 $3.0

2001 $5.0

2002 $7.0

2003 $9.0

2004 $11.0

2005 $14.0

Source: AMR Research, 2001



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IDC estimates that eCRM software sales will nearly double between 2002and 2004 to reach $9.51 billion within the next two years.

By comparison, UK-based research firm Ovum estimates that eCRMsoftware sales will reach $10.39 billion by 2005, up from just $1.31 billionin sales during 2000.

Estimated Worldwide eCRM Software Sales,1999-2004 (in billions)

1999 $0.93

2000 $2.15

2001 $3.81

2002 $5.60

2003 $7.66

2004 $9.51

Source: International Data Corporation (IDC), 2001


Worldwide eCRM Software Revenues, 2000-2005(in billions)

2000 $1.31

2001 $2.28

2002 $3.67

2003 $5.18

2004 $7.23

2005 $10.39

Source: Ovum, 2001



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In support of these growth forecasts, survey data from the ConferenceBoard has found that about one-quarter of US companies have prioritizedthe deployment of customer extranets and e-commerce solutions in 2002.

Interestingly, wireless capabilities and interactive communities were alsothe least-likely internet initiatives to be deployed by 29% and 25% ofrespondents to the Conference Board’s survey, respectively.

Despite the downturn in IT spending during the past year and a half,eMarketer has found that sell-side internet initiatives have remained a toppriority for a large number of businesses. According to several IT spendingsurveys that eMarketer follows, websites and e-commerce projects haveconsistently been among the top five spending priorities for the majority ofcompanies throughout this downturn.

Looking forward to businesses’ website development priorities for 2003,the Conference Board has found that increasing the level of onlinecustomer service, followed by lowering online transaction costs are at thetop of most US companies’ lists for next year.

And as an indication that companies have become more in tune withtheir online customers’ needs, a further 23% of respondents plan toimprove the ease of navigation on their websites in 2003.

Top Website Development Priorities for USCompanies, 2003 (as a % of respondents)

Increased level of customer service 27%

Lower transaction costs 23%

Improved ease of navigation 23%

Higher levels of interaction/participation 21%

Improved customer retention 21%



Leading Internet Capabilities to be Deployed by USCompanies, 2002 (as a % of respondents)

Wireless capabilities 54%

Supplier extranets 36%

Interactive e-communities 35%

Customer extranets 28%

E-Commerce capabilties 20%




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Without question, as the volume of internet e-commerce continues to trendupward, there will be a growing need for companies to provide onlinecustomer service to their consumer and business clients alike.

As evidence of this future growth, Jupiter Media Metrix released a studyin early 2002, which found that approximately 870 million customerservice contacts were handled via the internet in 2001. This figureaccounted for less than 2% of all customer service interactions in theUnited States, according to Jupiter, which are forecast to reach 4.7 billionsuch interactions by 2006.

As a means of preparing for this surge in online customer interaction,Jupiter found that 26% of the companies it surveyed planned to spend$500,000 or more on customer relationship management (CRM) systems in2002. Leading the way were companies in the financial services and retailindustries, which had already spent $3 billion and $1.7 billion on CRMsystems, respectively, in 2001.

As part of its coverage of the market for eCRM solutions, the YankeeGroup has broken down the five-year total cost of ownership (TCO) for twoseparate implementations of web-based customer self-service solutions.

The first implementation is described as being for a stand-alone solutionwith minimal integration to other back-end ERP or multi-channel CRMsystems. Such a solution would be capable of handling as many as 50,000user sessions per day and could provide users with a limited amount ofassisted service online.

Percent of Customer Service Inquiries Handled viathe Internet, 2001 & 2006

2001 2%

2006 10%

Source: Jupiter Media Metrix, Inc., 2002



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The initial up-front cost of this system is estimated to be $567,000, withongoing annual maintenance costs of about $200,000 per year. The YankeeGroup estimates the TCO for this solution would be a little more than $1.3million over five years.

The second implementation is for a multi-channel web self-service solutionthat would also be able to handle 50,000 user sessions per day, but link toas many as 150 call center agents as well. In addition to customer self-service capabilities, this system would be able to provide assisted onlineservices such as e-mail response and live chat. It would also be integratedwith other ERP or CRM systems.

Breakdown of the Five Year Total Cost of Ownershipfor a Stand-Alone Web Self-Service Solution, 2002

Softwarelicense

Professionalservices forimplemen-tation

Annual main-tenance fee

Staff to main-tain know-ledge content

Hardware

IT infra-structure

Data center/IT supportstaff

User training

Total Cost

Year 1

$200,000

$100,000

$36,000

$60,000

$30,000

$85,000

$50,000

$6,000

$567,000

Year 2

$0

$18,000

$36,000

$30,000

$0

$50,000

$50,000

$6,000

$190,000

Year 3

$0

$18,000

$36,000

$30,000

$10,000

$50,000

$50,000

$6,000

$200,000

Year 4

$0

$18,000

$36,000

$30,000

$0

$50,000

$50,000

$6,000

$190,000

Year 5

$0

$18,000

$36,000

$30,000

$10,000

$50,000

$50,000

$6,000

$200,000

5-year TCO

$200,000

$172,000

$180,000

$180,000

$50,0000

$285,000

$250,000

$30,000

$1,347,000

Source: Yankee Group, June 2002



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The Yankee Group estimates that the TCO for this self-service solution is$2.67 million over five years, with implementation fees for the integrationand customization of the system comprising the largest single cost. ThiseCRM solution is estimated to cost more than $1.3 million in its first year,and as much as $347,000 to maintain each year for the next four years.

Despite the high initial cost of eCRM solutions, many analysts point out thatthe long-term return on investment for these systems can be substantial.

Indeed, internet-based customer service has been found to beconsiderably less expensive than other service channels, especially whencustomers are given the opportunity to serve themselves.

Breakdown of the Five Year Total Cost of Ownershipfor a Multi-Channel Web Self-Service Solution, 2002

Softwarelicense

Professionalservices forimplemen-tation

Annual main-tenance fee

Staff to main-tain know-ledge content

Hardware

IT infrastruc-ture

Data center/IT supportstaff

User training

Total Cost

Year 1

$300,000

$600,000

$54,000

$120,000

$40,000

$85,000

$100,000

$30,000

$1,329,000

Year 2

$0

$27,000

$54,000

$90,000

$0

$50,000

$100,000

$6,000

$327,000

Year 3

$0

$27,000

$54,000

$90,000

$20,000

$50,000

$100,000

$6,000

$347,000

Year 4

$0

$27,000

$54,000

$90,000

$0

$50,000

$100,000

$6,000

$327,000

Year 5

$0

$27,000

$54,000

$90,000

$20,000

$50,000

$100,000

$6,000

$347,000

5-year TCO

$300,000

$708,000

$270,000

$480,000

$80,000

$285,000

$500,000

$54,000

$2,677,000

Source: Yankee Group, June 2002



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For example, Forrester Research estimates that live telephone-basedcustomer interactions cost approximately $33 per contact, versus just$1.17 per customer contact via a web-based self-service solution.

Similar comparative estimates from the Giga Information Group andMcKinsey & Company put the cost of telephone-based customer serviceinteractions at $10 and $7.50 respectively, while the Giga InformationGroup has estimated that web-based customer self-service costs as little as$0.50 per contact. McKinsey’s estimate for web-based self-service is evenlower, at $0.18 per interaction.

A third comparative estimate from Shop.org and the Boston ConsultingGroup indicates that the broader cost of online customer service in generalhas remained constant over the past three years, at about $2.50 per order.

Customer Service Costs in the US, by Channel, 2002(per contact)

Telephone

$33.00

E-Mail

$9.99

Live chat

$7.80

Web self-service

$1.17

20

40

Source: Forrester Research, 2002


Customer Service Costs for Online Retailers in the US,1999-2001 (cost per order)

1999 $2.40

2000 $2.50

2001 $2.50




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Because website operators are interested to learn how they can better servetheir customers, Jupiter Media Metrix believes that companies willincreasingly turn to analytical applications in order to help them betterunderstand online customer behavior.

Among those customer tracking features that website operators wereusing at the end of 2001, nearly two-thirds of US B2C and B2B websiteswere monitoring the amount of time that visitors spent on their website ingeneral and on individual pages.

Most companies also tracked how their customers arrived at theirwebsite, along with visitors’ interest in various online promotions.Surprisingly, barely more than one-third of companies monitored shoppingcart abandonment rates, which is critical for fine-tuning most firms’ onlinesales strategies.

Customer Tracking Features Used by US Companiesto Monitor Website Activity, 2001 (as a % ofrespondents)

Amount of time customers spend on primary website

63%

Amount of time customers spend on each area/page

62%

Information about customers' systems

57%

How customers arrive at company website

53%

Connection speed of website users

45%

Clickthroughs for store or company promotions

42%

Links to website from e-mail

40%

Shopping cart abandonment

37%

Click-throughs for promotions offered on other companies'websites

33%

Promotional source of orders

32%




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In an earlier study conducted by the Yankee Group, it was found that most companies’ eCRM initiatives had been somewhat disorganized in theyears prior to 2001, but that since then, companies were taking a moreorganized approach to integrating and rolling out their online customerservice initiatives.

“Few retailers have integrated site, brick-and-mortar, and catalog operations – let aloneestablished ways to track each channel’s impacton the others.”–Evie Black Dykema, Forrester Research

As of late 2001, the Direct Marketing Association (DMA) found that 75% ofUS B2C and B2B websites had at least partially integrated customer servicecapabilities between their online and telephone/fax operations.

Nearly two-thirds of companies, at 62% of respondents, said that theyhad also been able to integrate product information across their CRMsystems, while a significant 55% of respondents said they had integratedonline and offline order processing capabilities as well.

Consumer facing websites had a slight edge in their ability to offerintegrated order processing, with 68% of B2C websites claiming integratedonline and offline services. On the other hand, 75% of B2B websites hadintegrated their online customer service operations with their phone/faxoperations, compared to 70% of B2C websites.

US Companies' Websites with Fully IntegratedCustomer Service Capabilities, by Feature, 2001 (as a% of respondents)

Customer service

75%

Product information

62%

Order processing

55%

Product exchange and returns for credit

21%

Real-time inventory status updates

18%




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Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Looking more closely at those customer service features that onlineretailers were able to offer website visitors as of the fourth quarter of 2001,the e-tailing group found that 99% of retail websites provided a toll-freecustomer service number.

A further 90% of retail websites displayed their company’s privacy policyonline, and about three-quarters of retail websites posted the hours whentheir live customer service is available.

As a way of reducing online customer service costs, the e-tailing groupfound that the percent of retailers using automated customer responsefeatures to answer customer inquiries rose from 23% of online retailers atthe end of 2000 to 38% of retailers by the fourth quarter of 2001.

The use of automated response has likely impacted response times tocustomer e-mails as well, which decreased from an average 14.13 hours in2000 to 12.63 hours in 2001.

In a similar study of online retailers’ response times to customer e-mailinquiries, Jupiter Media Metrix found that 46% of pure-play internetretailers responded to customer e-mails within 24 hours, compared to 50%of multi-channel retailers.

Customer Service Information Provided on US RetailWebsites, 2001 (as a % of respondents)

Toll-free customer service phone number 99%

Privacy policy (or link to policy) 90%

Customer service hours 74%

Guarantee information 62%

Source: the e-tailing group and the Direct Marketing Association, 2002


E-Mail Response Rates and Auto Response Use among50 US E-Tailers, Q4 2000 & Q2 2001

Average number of hours to respond to customere-mail

Auto responses (% of sites)

Q4 2000

14.13

23%

Q2 2001

12.63

38%

Source: the e-tailing group, 2001



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Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

But despite the fact that a greater portion of online retailers have developedminimum standards for e-mail response times compared to years past, itwas still discovered that a substantial 40% of pure play internet retailersand 28% of multi-channel retailers did not have adequate resources toproperly respond to customer e-mails.

Among those retailers that are doing a good job at responding to customercorrespondence, four of the top five companies in the e-tailing group’s2002 study were traditional retailers with roots in offline sales.

US Retailers’ Response Time to Online CustomerService Inquiries, by Store Type, December 2001

Within 6 hours

33%

28%

6-24 hours

13%

22%

1-3 days

13%

22%

More than 3 days and no response at all

40%

28%

Online store only Brick-and-mortar with onlinestore

Source: Jupiter Media Metrix, January 2002



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Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

On average, online retail websites took more than 21 hours to respond tocustomer e-mail inquiries.

The e-tailing group also found that 79% of the websites it e-mailedresponded the first time that an e-mail was sent, while an additional 3% ofwebsites responded after a second e-mail was sent.

When it comes to confirming customer orders, a significant 98% ofretailers sent out a post-order e-mail confirmation to their customers. Andalthough fewer online retailers provided a shipping confirmation by e-mail, several online merchants added this feature during the course of 2001as a means of improving their customer service.

Time Taken to Answer Customer Service E-Mail bySelected US Online Merchants, 2002 (inhours:minutes)Nordstrom's 0:41

Bluelight.com 1:26

Land's End 2:03

KB Toys 3:22

Drugstore.com 3:42

Smith & Hawken 5:03

Amazon.com 6:46

CDNow 23:22

JC Penney 25:06

Sports Authority 25:07

Average of 100 sites shopped 21:08

Source: the e-tailing group, March 2002


US Retail Websites' Order Confirmation Features, Q42000 & Q4 2001 (as a % of websites surveyed*)

E-Mail shipping confirmation

54%

80%

Immediate shopping cart confirmation

84%

90%

Post order e-mail confirmation

92%

98%

Q4 2000 Q4 2001

Source: Direct Marketing Association/the e-tailing group, January 2002



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Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

As for customer self-service capabilities, 79% of retail websites letcustomers track their order’s shipping status online, and 54% of internetretailers were able to offer information about real-time inventory status ontheir websites.

eMarketer expects that several B2C and B2B companies are in the processof adding these capabilities to their websites during the course of 2002.

When it comes to providing online shoppers with shipping alternatives, thee-tailing group found that 66% of the websites it surveyed offered freeshipping during the 2001 holiday shopping season, typically at a thresholdof $100 to $200 per order. A further 4% of websites provided free shipping,regardless of the order size.

It is interesting to note that by providing internet shoppers with aminimum threshold for free shipping, retailers have discovered that this isan effective way to induce customers to increase the size of their orders.With Amazon.com recently lowering its free shipping threshold from $99to $49, it is likely that other online retailers will follow suit this comingholiday season.

If multi-channel retailers have a significant advantage over pure playinternet companies, it lies in their ability to integrate online and offlinesales channels by permitting customers to return merchandise that hasbeen purchased online at their brick-and-mortar stores.

Some pure play internet retailers and catalog companies have counteredthis advantage by making the return process for their online customers assimple as possible. This is typically accomplished by sending prepaid returnlabels along with customer orders, or by making online return formsavailable via their website.

Inventory and Shipping Information Provided by USRetail Websites, 2001

Shipping status

79%

Real-time inventory status

54%

Information about backordered/out of stock product

16%




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Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

However, as the e-tailing group has found, it appears that few onlinemerchants care to make the return process as simple as it could be.

Thanks to the internet’s popularity as a shopping channel for gift-givers,many online retail websites had already made gift certificates and giftsuggestions available via their websites by the 2000 holiday shoppingseason. By the 2001 season, 46% of online retailers had added a gift searchfeature to their websites as well.

The e-tailing group also found that nearly half of the websites itsurveyed offered both electronic or mail delivery of gift certificates, while83% were able to send gift certificates to a third-party recipient by mail.

Just over half of all online merchants, at 55% of the surveyed websites,provided gift-wrapping services, with 15% of those websites offering theservice for free. Among those retailers that charge for gift wrapping, theaverage cost was $4.59 in 2001, up from $4.31 in 2000.

Product Return Capabilities Offered by US RetailWebsites, 2001 (as a % of respondents)

Ability to return merchandise to brick-and-mortar stores

65%

Prepaid return labels shipped with product

15%

Online return forms

4%



Percent of US Retail Websites that Provide Gift-GivingFeatures, 2000 & 2001

Gift certificates/cards

70%

72%

Gift suggestions

86%

85%

Gift search

14%

46%

2000 2001




102


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

As companies have endeavored to make improvements to their websitesand streamline their online operations, the Conference Board has foundthat a significant number of website operators have had success at loweringtransaction costs. This has typically been accomplished through theautomation of order processing, or by better-integrating online operationswith back office systems.

Other areas that online merchants have succeeded in improving includethe depth of content on their websites, and the speed with whichinformation on their websites may be downloaded. US companies havebeen successful at driving more customer visits and better-retaining thosevisitors that come to their websites as well.

As for those areas that have been more challenging, increasing the level ofcustomer interaction was listed as being least successful among 47% ofrespondents to the Conference Board study. Indeed, as most consumersurveys have shown, online consumers are using the internet for utilitarianpurposes, and are less interested in interacting with the brands orcompanies with which they simply want to transact.

Areas of Website Development in Which USCompanies Have Had the Most Success, 2001 (as a %of respondents)

Lower transaction costs 35%

Improved depth of content 35%

Speedier download times 30%

More customer visits 30%

Improved customer retention 29%

Greater brand differentiation 26%

New products launched successfully 26%




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Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Acquiring new customers has also been difficult for a significant 35% of USwebsite operators in 2002, although this is largely a result of the difficulteconomic climate that has persisted through the first half of this year,especially for operators of business-to-business websites.

And finally, in an effort to determine a benchmark for the higheststandards in online customer service, the e-tailing group made purchases at100 retail websites during the early months of 2002, and then rated eachonline retailer’s service according to five separate categories.

It was found that on average, it took users 5.3 minutes to complete theironline purchases, which were accomplished within less than 6 clicks inmost instances. The average delivery time for goods purchased online was3.8 days, while most customer service inquiries received a response withinapproximately 21 hours.

Areas of Website Development in Which USCompanies Have Had the Least Success, 2001 (as a %of respondents)

More customer interaction/participation 47%

Greater brand differentiation 39%

Increased customer acquisition 35%

Greater market share 35%

New products launched successfully 32%




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Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

For product refunds, online shoppers were able to get credit within anaverage of 11.9 days, with Drugstore.com providing the fastest credit,which arrived within just one day.

Standouts include Amazon.com, Drugstore.com, Land’s End andNordstrom’s, all of which made their online customers’ shopping experienceas convenient as possible, while at the same time providing a rapidresolution to any potential problems that their customers’ might have.

The 10 Best Merchants for Online Customer Service inthe US, 2002

Amazon.com

Bluelight.com

CDNow

Drugstore.com

JC Penney

KB Toys

Land’s End

Nordstrom’s

Smith & Hawken

Sports Authority

Average of 100sites shopped

Time toshop

(inminutes)

4

7

7

4

6

5

4

5

3

4

5.3

# clicksto check

out

3

6

6

4

6

6

5

5

6

5

5.36

# ofbusinessdays toreceive

item

4

3

4

4

5

5

3

4

5

4

3.8

Time takento answer

e-mail(in hours:minutes)

6:46

1:26

23:22

3:42

25:06

3:22

2:03

:41

5:03

25:07

21.08

# daysto

receivecredit

10

21

14

1

15

16

6

4

12

10

11.9

Source: the e-tailing group, March 2002



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Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

B. User PreferencesIn a mid-2001 survey of 225 regular customers of Global 2000 companies,PricewaterhouseCoopers found that the vast majority of respondentstypically used the telephone to obtain customer service assistance. Anarrower 15.5% of respondents said that they used the internet forcustomer service, while a significant 22.0% indicated that they used e-mail.

Interestingly, of the eight alternate channels through which customersare able to contact the companies with which they do business, themajority indicated that they preferred the immediacy of telephone-basedcustomer service, ahead of in-person contact, e-mail and the internet.

Customer Service Contact Methods Used by Global2000 Customers, 2001 (as a % of respondents)

Telephone

87.9%

72.7%

In person

23.7%

12.5%

E-Mail

22.0%

6.5%

Internet

15.5%

6.4%

Mail

11.2%

0.9%

Fax

5.2%

0.0%

Mobile phone

7.8%

0.9%

PDA

0.4%

0.0%

Typical Preferred

Source: PricewaterhouseCoopers (PwC), 2002



106


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Just as customer service is important in the offline world, it is of equal, ifnot greater importance for people who buy online. As mentioned in thesecond chapter of this report, a single bad experience on a website may beenough to keep an internet user from ever returning, so it is important thatwebsite operators bring the same high standards of customer service fromtheir offline operations over to their online presence.

In a study conducted in early 2002, Forrester Research found thatcustomer service is the most important feature for high-end shoppers whovisit luxury goods websites, followed by a money-back guarantee and asimple means of exchanging merchandise.


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Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Features common to other consumer surveys were prevalent in Forrester’sresults as well, with online shoppers expecting that the websites they visitbe easy to use, quick to navigate and have some variety in productselection and shipping options.

Most Important Online Features for Visitors to LuxuryGoods Websites, 2002 (rated on a scale of 1 to 5*)

Good customer service

4.55

Money-back guarantee

4.48

Easy exchange of merchandise

4.46

Control over use of personal data

4.43

Website reliability

4.42

Ease of use

4.33

Wide product selection

3.99

Fast website

3.97

Information related to products/services sold

3.93

Wide range of shipping/delivery options

3.88

Brand name

3.65

Website personalization

3.55

Physical presence

3.49

Discounts or coupons

3.24

Personalized product recommendations

3.12

Recommendations to complement previous purchases

2.95

Note: *1=very unimportant, 5=very importantSource: Forrester Research, 2002



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Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

“Free shipping continues to represent the best wayfor e-retailers to bolster average order size andconversion rates,”– Geoff Wissman, Retail Forward

Indeed, Knowledge Systems and Research (KS&R) found in its 2001 surveyof online shoppers that free shipping was the most likely inducement thatwould encourage them to participate in an online incentive program.

Points programs, discounted pricing and free newsletters were listed aspopular online incentives that internet users said they had accepted as well.

US Consumers' Participation in Online IncentivePrograms, 2001 (as a % of respondents)

Free shipping

64%

Rewards programs (ability to earn points, etc.)

56%

Discounted pricing

48%

Free newsletters

48%

Drawings/Prizes/Give-Aways

47%

Faster speed of delivery

26%

Guaranteed delivery date

21%

Ability to return unwanted items to retail store

19%

Personalized information

13%

VIP customer service

9%

Other

3%

Note: n=1,149Source: Knowledge Systems & Research, March 2001



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Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Despite the fact that a growing number of internet users now have as manyas five years of online shopping experience, shipping charges continue tonegate the benefits that consumers feel they receive from the convenienceof being able to shop online.

Retail Forward has found in its mid-2002 survey that 70% of internetusers would shop online more if they did not have to pay shipping andhandling charges for the goods that they purchase. A further 56% ofrespondents said that an offer of free shipping has induced them to makean online purchase.

Other popular incentives that would encourage more online purchasesinclude lower prices and improved product selection.

Percent of US Consumers that Are Much More Likelyto be Induced to Make an Online Purchase, byIncentive, 2001

Free shipping

69%

Discounted pricing

67%

Improved product selection

55%

Ability to return unwanted items to retail store

49%

Guaranteed delivery date

48%

Faster speed of delivery

44%

VIP customer service

37%

Drawings/Prizes/Give-Aways

29%

Rewards programs (ability to earn points, etc.)

25%

Personalized information

20%

Free newsletters

11%




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Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

But beyond the interests of online bargain-hunters, perhaps the greatestdriver of online sales will come from the eventual realization of the truevision of multi-channel retailing, through which consumers will be able toshop for and purchase products online but take delivery or return items toretailers’ brick-and-mortar stores.

Such a vision would eliminate much of the inconvenience that shoppersface in the checkout line when they shop in-store, while at the same timemaximizing the benefits of shopping online through the elimination ofshipping charges.

Although the eventual vision of multi-channel retailing still has someway to go, many consumers appear to be happy with the progress that hasbeen made so far.

As for other customer service features at the disposal of online retailers,live chat and purchase recommendations were surprisingly found todecrease online consumers’ interest in buying from retail websites.

It should be noted that these results were part of a study that focusedupon online buyers of consumer electronic goods, and may therefore beless applicable to the broader consumer population.

US Consumers' Satisfaction with US MultichannelRetailers' Coordination between Channels, 2001 (as a% of respondents)

Somewhat/very satisfied 45%

Neutral 31%

Somewhat/very dissatisfied 7%

Not applicable 17%




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Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Nonetheless, the study does call in to question the need for excessivetechnology “gimmicks,” when it comes to providing online customerservice. As other surveys point out, consumers are far more concerned withgetting a timely resolution to their customer service needs.

When US consumers do encounter problems with a website they are using,most respondents to KS&R’s study said that they prefer to communicateabout such problems via e-mail.

However, a significant 40% of online consumers indicated that theypreferred the immediacy of telephone-based customer service – a preferencethat will only grow as more internet users sign up for broadband internetaccess, and are able to telephone customer service while remaining online.

In an earlier study from 2000, Cyber Dialogue found that toll-free customerservice was rated as the most helpful by online shoppers, followed byonline chat capabilities.

US Consumers' Opinions Regarding Special OnlineRetail Features, May 2002 (as a % of respondents*)

Live chat

29%

44%

Purchase recommendations

28%

33%

Increase likelihood ofpurchase

Decrease likelihood ofpurchase

Note: n=844Source: Consumer Electronics Association (CEA), June 2002


US Consumers' Preferred Means of CommunicatingAbout an Online Problem, 2001 (as a % ofrespondents)

E-Mail 58%

Telephone 40%

In-person location (i.e., retail store) 2%

Note: n=1,149Source: Knowledge Systems & Research, 2001



112


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

As the results of this study seem to confirm, internet users prefer to have animmediate response to any questions or difficulties that they mayencounter while online, and are less satisfied when they are required towait for a reply by e-mail, even if it comes within a few hours.

However, the jury appears to still be out on consumers’ interest in usingonline chat capabilities, as conflicting survey data show that some onlineshoppers find it to be helpful, while others do not find online chat to beuseful at all.

For example, in a more recent study, Forrester Research found thatalthough 20% of internet shoppers had made use of online chat service in2002, just 10% of respondents indicated that they wanted to use suchcapabilities for future customer service interactions.

Customer Service Formats Preferred by US OnlineShoppers, 2000Format

Toll-free call to liveservice person

"Speak to me" buttonto speak to serviceperson online

Frequently askedquestions page on site

"Call-me" button tohave service personcall back within 24hours

Extremely helpful

55%

31%

23%

23%

Very helpful

28%

32%

35%

30%

Somewhat helpful

10%

21%

26%

26%

Not helpful

6%

14%

14%

19%

Not sure

1%

2%

2%

2%

Source: Cyber Dialogue, 2000


Percent of Online Shoppers Who Have UsedInteractive Chat for Customer Service, 1999 & 2002

Have tried

2%

20%

Want to use

3%

10%

1999 2002

Source: Forrester Research, 2002; MSNBC, July 2002



113


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Interestingly, more people today are familiar with online chat through theiruse of instant messaging, but fewer seem to want to use it for commercialinteractions. It appears that the interest in online chat among surveyrespondents in 1999 may have been attributable to its novelty at the time.

Regardless of whether they are seeking customer service by telephone orthrough self-service features on a website, it appears that just over half ofAmerican consumers have a threshold of no more than five minutes beforethey become frustrated with the level of service.

For website operators, this confirms the need for simple and clear websitenavigation capabilities, along with the use of content that does notsignificantly add to download times as users move from page to page.

Web pages that provide self-service features should therefore be free ofexcessive rich media content or unnecessary advertising, and be designedto maximize convenience for the user.

Knowledge Systems and Research has confirmed the need for timelyresponses to customer inquiries, finding that slow response times to onlinequeries is considered to be a problem by 75% of internet users.

US Consumer Experience with Customer Service, 2001(as a % of respondents)

Wait on hold no more than 5 minutes before rating customerservice "poor"

54%

Spend no more than 5 minutes navigating a vendor, biller, orbank website before calling customer service

50%

Source: Mobius, January 2002



114


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Internet users have also complained of standard form replies, which inmost instances do not resolve their specific needs. Not posting a telephonenumber for customer service is at least somewhat of a problem for 69% ofrespondents to KS&R’s study, while 70% of internet users said that a lack ofcoordination among website operators’ online and offline divisions is afrustration as well.

Once again, time is of the essence for internet users who look favorablyupon online retailers that are able to resolve any problem they may have asquickly as possible.

US Consumers' Assessment of Website CustomerService Capabilities, 2001 (as a % of respondents)

Form reply is only option given

27%

44%

29%

No phone number is listed

31%

44%

25%

Lack of coordination between different company departments

30%

46%

24%

Slow response time

25%

54%

21%

Not a problem at all Somewhat or a problem

Major problem




115


Methodology

Introduction

B2C Websites

B2B Websites


Index of Charts

Interestingly, other customer service actions such as refunds or freeshipping are preferred by far fewer consumers, who place a higher valueupon efficient customer service.

Most Important Action that Website Operators CanTake to Resolve a Customer Service Problem, 2001 (asa % of respondents)

Quickly resolve the problem 72%

Provide a full refund 16%

Provide free shipping 5%

Provide coupons for further purchases 4%

Other 4%



Methodology 5

I Introduction 9

II B2C Websites 23

III B2B Websites 65


Index of Charts 117


117



118


Index of ChartsMethodology 5




I Introduction 9

Number of Internet Hosts, by Top Level Domain 10


Cumulative Domain Name Registrations in the .Com, .Net and .Org Domains 11

Number of Websites Worldwide 12

Classification of Public Website Providers’ Primary Economic Activity 13

Secure Servers per Million Inhabitants in the EU and US 14

Website Language Availability Worldwide 14


Internet Users Worldwide, by Region 15

Total US Internet Users and Internet Users Ages 14+ 16

US Consumer Online Buying and Shopping Grid 17

Top 10 US Internet Categories 18

Top 10 US Internet Properties 19


Primary Purpose of US Companies’ Websites 20

Length of Time that US Companies Have Had a Website 20

US Companies’ Expected Timing of Profitability for their WebsiteOperations 21

The Internet’s Impact on the Sales Cycle 22

II B2C Websites 23


Primary Purpose of US Companies’ B2C Websites 25

Catalog Companies’ Average Annual Spending* on Website Operations,by Company Size 26

Average Number of Employees Working Fulltime on Catalog Companies’Websites 26

Percent of Online Catalog Operators that Use In-House Website Design 27

Percent of Catalog Companies that Have Reduced Their Website Budgets,by Company Size 27

Breakdown of US Companies’ Spending on their B2C Websites 28

US B2C Companies’ Forecast Website Development Budgets 28

US Companies’ Anticipated 2002 Budgets for the Marketing andPromotion of their B2C Websites 29

Monthly Traffic and Sales Capabilities for a Website Selling ConvenienceProducts, by Type of Website 30

Monthly Traffic and Sales Capabilities for a Website Selling ResearchedProducts, by Type of Website 30

Monthly Traffic and Sales Capabilities for a Website Selling ReplenishmentProducts, by Type of Website 31


119


Index of ChartsHow US B2C Website Operators Measure the Success of their OnlineMedia Initiatives 32

Breakdown of Third-Year ROI for a “Sophisticated” Website Designed toSell Convenience Goods 33

Breakdown of Third-Year ROI for a “Sophisticated” Website Designed toSell Researched Goods 34

Breakdown of Third-Year ROI for a “Basic” Website Designed to SellReplenishment Goods 35

Percent of US Companies’ B2C Websites Able to Conduct FinancialTransactions 35

E-Business Profile: Approximate Number of Product SKU’s Available viaMacys.com 36

Average Dollar Value* of US B2C Companies’ Online Transactions 36

Website Features and Functions Offered on US B2C Websites 37

Technology Adoption by E-Commerce Websites 38

Average Number of Clicks to Checkout on US Retail Websites during theHoliday Season 39

US Retail Website Features 39

US Retail Websites that Offer Personalized Features 40

US Retail Websites Offering Community Features 40

US Websites Offering Multiple Shipping Options 41

How US B2C Companies Price Their Delivery Charges for Online Sales 41

US Internet Retailers’ Average Fulfillment Cost per Order 42

US Internet Retailers’ Average Customer Acquisition Cost per NewCustomer 43

How US B2C Website Operators Drive Website Traffic 44

Percent of Catalog Companies Using Website Analysis Tools to TrackVisitor Usage, by Company Size 45

Percent of US B2C Websites that Use Applications to Identify WebsiteVisitors 45

How US B2C Website Operators Segment their Online Customers 46

Average Number of Page Views by Visitors to US B2C Websites 47

Average Number of Daily Unique Visitors to US B2C Websites 47

Top 10 Retail Websites, by Monthly Traffic 48

E-Business Profile: Online Sales at JCrew.com 48

E-Business Profile: Sales via Landsend.com 49

Order Conversion Rate among Online Buyers in the US 49

E-Business Profile: Amazon.com’s Annual Sales 49

Top 10 US E-Retailers Ranked by Online Revenues 50


How Internet Users Arrive at Websites 51

Most Important Website Features for US Internet Users 52

Website Features that Internet Users Worldwide Are Happy or Satisfiedwith 53


120


Index of ChartsWebsite Features that Internet Users Worldwide Are Unsatisfied with orIndifferent Toward 53

Most Important Website Design Features for US Online Consumers 54

Key Characteristics of User-Friendly Informational Websites 55

Key Characteristics of User-Friendly Shopping Websites 56

Main Reasons US Internet Users Do Not Buy Online 57

Most Common Frustrations of US Online Shoppers 57

US Consumers’ Most Likely Action Taken When Frustrated by Too ManyClicks on a Website 58

US Online Consumers’ Top Reasons for Shopping Cart Abandonment 59

Products that US Internet Users Research Online and Subsequently Buyat Retailers’ Stores 60

Features Likely to Increase Online Purchasing in the US 61

US Consumers’ Expectations of Website Operators in Exchange for theProvision of Personal Information 62

Online Spending Habits of US Consumers Who Value PersonalizationFeatures 62

Frequency with Which US Users of Customized Webpages Update TheirSpecifications/Preferences 63

Action Taken by US Internet Users After Being Asked to Pay for Access toa Previously Free Website 64

III B2B Websites 65


Internet Capabilities Deployed by US Companies 66

North American Companies’ Website Operating Capabilities 67

Primary Purpose of US Companies’ B2B Websites 68

Reasons Why US Small Businesses Have a Website 69

Features Offered on Corporate Websites Worldwide 70

Website Features and Functions Offered on US B2B Websites 71

Primary Designers of US Small Business Websites 72

Percent of US Companies’ B2B Websites Able to Conduct FinancialTransactions 72

Average Dollar Value* of US B2B Companies’ Online Transactions 73

Average Number of Daily Unique Visitors to US B2B Websites 73

Website Development Costs for a Small and Midsize Project 74

Website Development Costs for a Large Project 75

Comparison of Median Prices for Website Development Projects 75

US B2B Companies’ Forecast Website Development Budgets 76

Breakdown of US Companies’ Spending on their B2B Websites 76

How US B2B Website Operators Measure the Success of their OnlineMedia Initiatives 77

How US B2B Website Operators Drive Website Traffic 78

Percent of US B2B Websites that Use Applications to Identify WebsiteVisitors 79

Online Customer-Service Features Offered by B2B Websites 79

How US B2B Website Operators Segment their Online Customers 80


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Index of ChartsB. User Preferences 81

Percent of US Companies Buying Direct Goods/Services via the Internet81

Percent of US Companies Buying Indirect Goods/Services via the Internet81

Information Sources Used by Business Leaders to Gain Information Abouttheir Industry’s Sector 82

Stakeholders at US Manufacturing Firms that Participate in SourcingActivities 83

Percent of US Purchasing Professionals Using Suppliers’ Websites forSourcing 83

What B2B Buyers Want to See on Suppliers’ Websites 84

User Assessment of B2B Interactions 85

Leading Complaints About B2B Websites 85

Leading Problems that US Business Buyers Have Encountered withWebsites 86

Percent of US Business Buyers Listing Their Online Customer ServiceExperience as Satisfactory, by Service Channel 86



Estimated Worldwide Sell-Side E-Commerce Software Sales 88

Estimated Worldwide eCRM Software Sales 89

Worldwide eCRM Software Revenues 89

Top Website Development Priorities for US Companies 90

Leading Internet Capabilities to be Deployed by US Companies 90

Percent of Customer Service Inquiries Handled via the Internet 91

Breakdown of the Five Year Total Cost of Ownership for a Stand-AloneWeb Self-Service Solution 92

Breakdown of the Five Year Total Cost of Ownership for a Multi-ChannelWeb Self-Service Solution 93

Customer Service Costs in the US, by Channel 94

Customer Service Costs for Online Retailers in the US 94

Customer Tracking Features Used by US Companies to Monitor WebsiteActivity 95

US Companies’ Websites with Fully Integrated Customer ServiceCapabilities, by Feature 96

Customer Service Information Provided on US Retail Websites 97

E-Mail Response Rates and Auto Response Use among 50 US E-Tailers 97

US Retailers’ Response Time to Online Customer Service Inquiries, byStore Type 98

Time Taken to Answer Customer Service E-Mail by Selected US OnlineMerchants 99

US Retail Websites’ Order Confirmation Features 99

Inventory and Shipping Information Provided by US Retail Websites 100

Product Return Capabilities Offered by US Retail Websites 101

Percent of US Retail Websites that Provide Gift-Giving Features 101


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Index of ChartsAreas of Website Development in Which US Companies Have Had theMost Success 102

Areas of Website Development in Which US Companies Have Had theLeast Success 103

The 10 Best Merchants for Online Customer Service in the US 104


Customer Service Contact Methods Used by Global 2000 Customers 105

Most Important Online Features for Visitors to Luxury Goods Websites 107

US Consumers’ Participation in Online Incentive Programs 108

Percent of US Consumers that Are Much More Likely to be Induced toMake an Online Purchase, by Incentive 109

US Consumers’ Satisfaction with US Multichannel Retailers’ Coordinationbetween Channels 110

US Consumers’ Opinions Regarding Special Online Retail Features 111

US Consumers’ Preferred Means of Communicating About an OnlineProblem 111

Customer Service Formats Preferred by US Online Shoppers 112

Percent of Online Shoppers Who Have Used Interactive Chat forCustomer Service 112

US Consumer Experience with Customer Service 113

US Consumers’ Assessment of Website Customer Service Capabilities 114

Most Important Action that Website Operators Can Take to Resolve aCustomer Service Problem 115

Index of Charts 117


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Also Available from eMarketer

Asia Online: Demographics, Infrastructure, Usage Patternsand eCommerce Trends

■ Economy & infrastructure■ Internet users & demographics■ eCommerce, E-Finance & E-Advertising■ Country profiles

ASPs■ Market size & growth■ Industry leaders■ Usage patterns■ Customer satisfaction

Brazil Online: Demographics, Usage Patterns and E-CommerceTrends

■ Economy & infrastructure■ Internet users & demographics■ E-Commerce, E-Finance & E-Advertising

Broadband■ Users by access method (dial-up, fiber, DSL, cable, satellite,

wireless)■ Residential and business usage■ Access revenues■ User demographics■ Country profiles

CRM■ Market size & growth■ Leading vendors■ Budgeting & implementation

eBanking■ Online banking around the world (US, Europe, Asia)■ Mobile banking■ Electronic bill presentment and payment

eCanada■ Economy & infrastructure■ Internet users & demographics■ E-Commerce, E-Finance & E-Advertising

eCommerce: B2B■ E-Commerce: B2B revenues around the world, country by

country■ E-Commerce: B2B by industry■ Internet penetration among businesses■ Online marketplaces, auctions and exchanges

eCommerce: B2C■ E-Commerce: B2C revenues worldwide■ Top B2C categories■ Online shoppers, buying frequency and size of transactions■ E-Consumer attitudes and behaviors


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North America Online■ User demographics worldwide■ Age, gender and race■ Income, education and occupation■ Usage patterns

eGlobal■ Internet infrastructure, by region■ Users and usage, by region■ E-Demographics, by region■ E-Commerce, by region

eHealth■ Consumer demographics and attitudes■ Healthcare personnel, demographics and usage■ B2C spending■ B2B spending

eInvesting■ Online brokerages■ Online mutual funds■ Online asset management■ Online investment advice

eMail Marketing■ E-Mail marketing revenues worldwide■ E-Mail users and user demographics■ Permission, opt-in and opt-out■ E-Mail marketing techniques and strategies

ePoland■ Economy & infrastructure■ Internet users & demographics■ E-Commerce, E-Finance & E-Advertising

ePrivacy & Security■ Consumer attitudes & behavior toward online privacy■ Online fraud■ Credit card security■ Corporate security (hacking and denial-of-service attacks)■ Virus attacks

Europe Online■ Economy & infrastructure■ Internet users & demographics■ E-Commerce, E-Finance & E-Advertising■ Country profiles

eWireless■ Mobile Internet use around the world, country by country■ M-Commerce■ M-Finance■ M-Advertising


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Interactive Television■ User forecast■ Revenue forecast■ Business attitudes & behavior■ User attitudes & behavior

Japan Online: Demographics, Usage Patterns and E-CommerceTrends

■ Economy & infrastructure■ Internet users & demographics■ E-Commerce, E-Finance & E-Advertising

Latin America Online: Demographics, Infrastructure, UsagePatterns and E-Commerce Trends

■ Economy & infrastructure■ Internet users & demographics■ E-Commerce, E-Finance & E-Advertising■ Country profiles

Marketing Online to Kids & Teens■ Demographics■ Advertising & marketing■ E-Commerce■ Special considerations

Online Advertising: Statistics, Strategies, Tools and Trends■ eAdvertising revenues worldwide■ Spending by ad format (banner ads, sponsorships, e-mail, etc.)■ Spending by industry category■ Measurements and standards (click-through rates, CPMs, ROI)

Online Marketing■ Viral marketing■ Direct marketing vs. Branding■ Search engine optimization■ Affiliate programs■ Classifieds■ Coupons

For more information, or to order a copy, contact eMarketer at:

Phone: 212.677.6300 Fax: 212.777.1172

eMail: [email protected] Web: www.emarketer.com

For media inquiries:Terry Chabrowe, [email protected]

For inquiries about this report or other eMarketer reports:Nick Fainelli, New Business Development, [email protected]


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Online Selling & eCRM August 2002 · 2003-10-22 · Online Selling & eCRM Methodology Introduction...

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Transcript of Online Selling & eCRM August 2002 · 2003-10-22 · Online Selling & eCRM Methodology Introduction...